Egypt to face more economic strains with collapse of grain deal

Egypt to face more economic strains with collapse of grain deal

The collapse of the Black Sea grain initiative and the ensuing rise in global wheat prices is expected to add more strains on Egypt’s struggling economy and aggravate inflationary pressures, Capital Economics warned.

"Even if supply disruptions are avoided, higher wheat prices would add to strains in Egypt’s balance of payments, force the government to cut non-subsidy spending, and push up inflation," read a policy briefing issued on Monday.

Last week, Russia pulled out of the UN-brokered agreement that ensured the safe passage of 33 million tons of grain and foodstuff from Ukraine to the rest of the world following the outbreak of the ongoing war. Few days later, Russia launched a series of strikes on Ukrainian ports_ moves that led to an immediate increase in global grain prices and brought Russia under international criticism. Last week, wheat futures jumped by 9%, which Bloomberg described as the biggest increase since 2012.

"Egypt is particularly vulnerable to developments in the wheat market," the briefing said. "It is, after all, the world’s largest wheat importer and, prior to the war, nearly 90% of its imports and around 45% of its total wheat needs came from Russia and Ukraine."

The London-based think tank expects Egypt’s wheat import