Icelandic Grocery Shelves Emptying -- Food Supply Threatened...
Icelandic Shoppers Splurge as Currency Woes Reduce Food Imports
BLOOMBERG
Oct. 13 (Bloomberg) -- After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.
Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.
Iceland's foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won't trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.
The crisis is already hitting clothing retailers. A short walk from Bonus in the capital's Kringlan shopping center, Ragnhildur Anna Jonsdottir, 38, owner of the Next Plc clothing store, said she can't get any foreign currency to pay for incoming shipments and, even if she could, the exchange rate would be prohibitively high.
``We aren't getting new shipments in, as we normally do once a week,'' Jonsdottir said. ``This is the third week that we haven't had any shipments.''
Bankrupt
``There is absolutely no currency in the country today to import,'' said Andres Magnusson, chief executive officer of the Icelandic Federation of Trade and Services in Reykjavik. ``The only way we can solve this problem is to get the IMF into the country.''
Imports Dependency
The International Monetary Fund sent a delegation to the island last week. Prime Minister Geir Haarde said on Oct. 9 his country may ask it for money after failing to get ``the response that we felt that we should be able to get'' from European governments and central banks. The state will also start talks with Russia over a possible 4 billion-euro ($5.5 billion) loan.
Iceland's rugged, treeless terrain, a barren stretch of volcanic rock, geysers and moss, means the country imports most food, other than meat, fish and dairy products.
Magnusson said last week that one of Iceland's largest supermarket chains was unable to get any foreign currency to make purchases abroad and another retailer's electronic payment didn't go through. Iceland will begin to see shortages of ``regular goods'' by the end of the week if nothing changes, he said.
``We are struggling to make the economy survive from hour to hour,'' Magnusson said. ``There is an enormous amount of capital that wants to get out of the country.''
Sedlabanki told lenders on Oct. 10 that residents who want foreign currency should first prove they need the money for traveling by providing documentation for their trip.
Essential Goods
Wholesalers are demanding that importers pay before any goods are shipped, said Knutur Signarsson, head of the Reykjavik-based Federation of Icelandic Trade. Under normal circumstances, wholesalers abroad would extend credit for 30 to 90 days, he said.
``Many of them ask us to pay cash before they send the goods to Iceland,'' Signarsson said. ``Because of the situation, Iceland has become a country that no one trusts any longer.''
By Chad Thomas
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