Russo-Ukrainian War: latest news

Russia’s invasion of Ukraine is putting Egypt’s economy under pressure, raising concerns about popular discontent in the Middle East’s most populous country.

The Egyptian pound fell more than 11% on Monday as the country’s central bank hiked key rates by 100 basis points each in a surprise meeting, the first rate hike since 2017. Analysts had expected that the bank raises interest rates at a scheduled meeting. for Thursday.

In a statement, the central bank said it was acting in response to “global inflationary pressures” as well as supply chain disruptions and rising commodity prices. Annual headline inflation hit 8.8% in Egypt in February, the highest rate in more than three years, according to the central bank.

“These pressures have amplified with the recent Russian-Ukrainian conflict,” the bank said.

Egypt is the world’s largest wheat importer, which makes it particularly vulnerable to the shock of the war in Ukraine. Tens of millions of Egyptians depend on subsidized bread, with Egypt getting up to 85% of its wheat from Ukraine and Russia.

Last week, the Egyptian government imposed new price controls on unsubsidized bread. The government on Monday set prices between half a pound and a pound per loaf, depending on the type of bread.

The price of bread is a central political issue in Egypt. Rising food prices are seen as one of the framework conditions that led to the 2011 uprising that toppled former President Hosni Mubarak.

Egypt’s wider economy has grown in recent years, but living standards have fallen sharply for most of Egypt’s 100 million due to government austerity in conjunction with an IMF loan program that has started in 2016.

Foreign investors have pulled out of Egypt since Russia launched its invasion of Ukraine last month, fearing Egypt’s economy could suffer from the war. Egypt also faces a loss of income from Russian and Ukrainian tourists, a key source of foreign currency.

The Egyptian pound has been relatively stable for years, partly thanks to interventions by Egypt’s state-owned commercial banks, according to economists and bankers. The government did not recognize the interventions.

“People’s income does not correspond to a decent life, but we are doing our best to improve the [economic] situation,” President Abdel Fattah Al Sisi said in televised statements on Sunday evening, saying Egypt faces no shortage of commodities or wheat.

The Central Bank said it had decided to raise the overnight deposit rate, overnight lending rate and main transaction rate by 100 basis points each to 9.25%, 10 .25% and 9.75%, respectively.

The invasion disrupted Ukraine’s grain exports via the Black Sea and also raised doubts about the country’s ability to sow for the next harvest.

Egypt is by no means the African country most dependent on Russian and Ukrainian food supplies. According to the UN, Somalia and Benin were each entirely dependent on the two countries for their wheat imports from 2018 to 2020. While other sources of wheat are available, world prices have surged since the invasion.

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