Cairo -

The fears of the world's countries about the repercussions of Russia's war on Ukraine have turned into realities, and with the passage of time they have begun to form a worrying concern for the emerging countries (third world countries), especially those that depend on providing their basic needs of oil and grain through imports, and providing hard currency through Internal and external borrowing mechanism.

Oil prices in global markets touched $140 a barrel last Sunday, and approached their record level of $147,5 recorded in July 2008.

Egypt’s imports of crude oil, petroleum materials and its derivatives without natural gas recorded about $9.3 billion from November 2020 to November 2021, compared to exports of about $9.2 billion, according to a statement by the Central Agency for Public Mobilization and Statistics.

Wheat prices in the world got out of control due to the repercussions of Russia’s war on Ukraine, which secure about 30% of global wheat supplies and 80% of Egypt’s needs (the largest importer of wheat in the world) with an annual average of 13.8 million tons, while domestic consumption is about 22 million tons annually.

The bill for importing wheat amounts to $3 billion annually, but it is likely to increase by about $1 billion. Egyptian Finance Minister Mohamed Maait said that rising wheat prices around the world will increase the cost of imports by 15 billion Egyptian pounds (about $1 billion) in the current year’s budget.

High oil and wheat prices put pressure on the Egyptian government (Al-Jazeera)

The average bill for importing food commodities in Egypt annually amounts to about $10 billion, according to the Central Agency for Public Mobilization and Statistics, with all kinds of grains, oils and meat taking the largest share.

The jumps in the prices of food commodities and oil globally increase pressure on the Egyptian government, as the non-oil trade balance deficit ranges between 40 billion and 45 billion dollars annually, and it is forced to borrow through various debt instruments in order to finance the budget deficit, which is threatened to rise, in addition to the exit of part of the Investors from the market - whether from debt instruments or the stock exchange - and the high cost of borrowing.

The Egyptian Finance Minister, Mohamed Maait, had commented a few days ago on the issue of foreign investments' exit from local debt instruments, saying that "this exit is expected, and we are dealing with this reality."

Investment bank "JP Morgan" expects a decrease in the value of the Egyptian pound by 8.5% to reach 17.25 instead of the current rate of 15.66 pounds against the dollar, according to what was published by "Reuters" pic.twitter.com/UdXpQfPHN4

— Al Jazeera Egypt (@AJA_Egypt) March 9, 2022

The consequences of the crisis and ways to hedge

The great fluctuations in global markets impose on the world - especially the emerging countries, including Egypt - great pressure, according to the economist Ibrahim Nawar, and impose on the government to change its economic approach in the future to hedge against such crises that occur suddenly without introductions, such as natural disasters.

Nawar explained in his speech to Al Jazeera Net that Egypt has some measures to confront the pressures arising from the crisis of Russia's war on Ukraine, such as raising the interest rate on debt instruments to stop the flight of foreign investments from the market, to maintain a degree of stability, bearing in mind that achieving a level of The balance in the current and future periods will be more difficult than the previous period before the war.

He pointed out that Egypt imports and exports crude oil and its derivatives at the same time, but the increase in natural and liquefied gas exports and the increase in their quantities, whose global price has also risen, will compensate for part of the country's oil needs. With regard to wheat, the government said that it has a reserve stock that suffices for 4 months. In addition, it is waiting for the local wheat crop next month, which eases the impact of its price hike.

The economist considered that the current global crisis and the crisis of the Corona pandemic impose on the government to change its economic approach so that it is not hostage to the current fluctuations in global markets, through the work of a strong economic structure that can face such crises, especially since Egypt is a developing country with low revenues on the one hand and the poverty rate on the one hand. It is high, about 30%, according to official government figures, and the lower the poverty rate, the greater the state's resilience in the face of dangers.

Prime Minister Mostafa Madbouly says that Egypt has enough wheat until the end of the year because the local harvest will start next April pic.twitter.com/uKDjd9pFTF

— Al Jazeera Egypt (@AJA_Egypt) March 9, 2022

The current crisis prompted the Egyptian billionaire and businessman Naguib Sawiris to present his vision about dealing with the energy and grain file.

Sawiris said on his Twitter account that the measures that must be implemented quickly to confront the rise in oil and wheat prices and its impact on the economy are represented in 3 axes:

  • Replacement of power generation from gas and diesel with alternative energy.

  • Exporting liquefied gas from liquid gas stations to Europe, to benefit from the high price of gas and to compensate for Russian gas.

  • Increasing wheat cultivation areas.

Measures to be implemented quickly to confront the rise in oil and wheat prices and its impact on the economy:


- Replacing power generation from gas and diesel with alternative energy


- Exporting liquefied gas from liquid gas stations to Europe to benefit from the high gas price and compensating for Russian gas


- Increasing wheat cultivation areas

— Naguib Sawiris (@NaguibSawiris) March 7, 2022

Hot money out

Reuters quoted sources in the banking sector in Egypt - unnamed - that the country witnessed the exit of 3 billion dollars through a medium wave of sale of Egyptian debt securities since the start of Russia's war on Ukraine.

Also, the yield on Egyptian pound-denominated notes jumped by between 30-40% on average, in addition to a sharp drop in net foreign assets in the Egyptian banking system, which shows the extent of the increasing pressure on the exchange rate, according to the agency.

The agency added that many investors are concerned that emerging markets will be more vulnerable to any shocks from the disruption of trade with Russia, including the resulting increase in the prices of some commodities.

After the Russian war on Ukraine, the pound faces several challenges, most notably the increase in wheat import costs and the decrease in the number of Ukrainian and Russian tourists, amid expectations of JPMorgan declining against the dollar pic.twitter.com/1cbRM4ygQH

— Al Jazeera Egypt (@AJA_Egypt) March 9, 2022

Two options for facing the crisis

The high cost of interest rates on debt instruments would increase pressure on the local currency, according to Egyptian-American economist and businessman Dr. Mohamed Rizk, in order to maintain the survival of a large portion of foreign investors who flee to safe havens in times of local and global turmoil.

With regard to the Egyptian government's options to deal with the current crisis, Rizk confirmed in statements to Al Jazeera Net that the government is obliged to do two things:

  •  The first is the increase in interest rates, which is what we referred to at the beginning.

  • Second: Decreasing the value of the pound to bring it close to its true value, and then trying to stabilize it and not fluctuate so as not to lose control of it, especially since it has experience in this field.