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Thndr Claps » EGY Claps » Economy 🏙 » How can Egypt weather the Russia-Ukraine storm?🌾

How can Egypt weather the Russia-Ukraine storm?🌾

by Shams Abbas
March 19, 2022

The Clap
The Russia-Ukraine crisis is hitting Egypt on different sides, & policy action(s) could be needed soon.

The deets
Egypt’s budget is expected to take a hit (EGP 15 billion) as a result of rising commodity prices, especially wheat, with Russia the source for more than 80% of our wheat imports. Tourism will also be affected, as one-third of our arrivals come from Russia & Ukraine.

Our energy sector seems a little stronger, as our increased gas exports could make up for higher oil import costs.

What options do we have?
There’s a range of possible policy interventions, including 1) raising interest rates to tackle rising inflation, 2) an IMF program to help with increased budget costs, & 3) an exchange-rate depreciation. However, FitchRatings ruled out the possibility of the latter option, citing heavier potential negative effects on domestic inflation & investors’ confidence.

They do see the CBE raising interest rates as early as this month, as well as a possible IMF program in the works.

As for our wheat concentration risk, the IMF recommends looking to other countries to import our wheat.

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