Russo-Ukrainian war: the latest news

Russia’s invasion of Ukraine is putting the Egyptian 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 while the Central Bank of Egypt raised key interest rates by 100 basis points each in a surprise meeting, the first rate increase since 2017. Analysts had expected the bank to raise interest rates at a scheduled meeting. for Thursday.

The central bank said in a statement that it was acting in response to “global inflation pressures” along with supply chain disruptions and rising commodity prices. The annual general inflation rate reached 8.8% in Egypt in February, the highest rate in more than three years, according to the Central Bank.

“These pressures have been amplified by the recent conflict between Russia and Ukraine,” the bank said.

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

Last week, the Egyptian government imposed new restrictions on the prices of unsubsidized bread. On Monday, the government set prices between half a pound and one 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 general conditions that led to the 2011 uprising that toppled former President Hosni Mubarak.

Egypt’s broader economy has grown in recent years, but living standards have fallen sharply for most of Egypt’s 100 million people as a result of government austerity in conjunction with the IMF loan program that began in 2016.

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Foreign investors have retreated from Egypt since Russia launched its invasion of Ukraine last month over concerns about how the Egyptian economy will suffer as a result of the war. Egypt also faces a loss of revenue for Russian and Ukrainian tourists, the main source of foreign currency.

Economists and bankers say the Egyptian pound has been relatively stable for years, in part due to the interventions of state-owned commercial banks in Egypt. The government did not acknowledge the interventions.

“People’s income is not compatible with a decent life, but we are trying our best to improve [economic] President Abdel Fattah El-Sisi said in televised statements on Sunday evening, stressing that Egypt does not suffer from a shortage of basic commodities or wheat.

The central bank said it decided to raise the overnight deposit rate, the overnight lending rate and the key operation rate by 100 basis points each to 9.25%, 10.25% and 9.75%, respectively.

The invasion disrupted grain exports from Ukraine through the Black Sea, and also raised doubts about that country’s ability to farm for the next harvest.

Egypt is by no means the African country most dependent on Russian and Ukrainian food supplies. According to the United Nations, both Somalia and Benin depended entirely on the two countries for their wheat imports from 2018 to 2020. While other sources of wheat are available, global prices have risen since the invasion.

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