Ukraine War Strains North Africa Economies

“This has the potential to upend global trade flows, further fuel inflation, and create even more geopolitical tensions around the world,” she said.

After years of mismanaging their water supplies and agricultural industries, countries like Egypt, Algeria, Tunisia and Morocco cannot afford to feed their own populations without importing food — and heavily subsidizing it. In recent years, the number of undernourished people in the Arab world has increased because of the overreliance on food imports, as well as a scarcity of arable land and rapid population growth.

Beyond its effect on the price of bread, the uncertainty and turmoil brought on by the war will push up interest rates and lower access to credit, which, in turn, would quickly force governments to spend more to service their high debts and squeeze essential spending on health care, education, wages and public investments, said Ishac Diwan, an economist specializing in the Arab world at Paris Sciences et Lettres university.

He predicted a rise in economic pressure on Egypt, Tunisia, Jordan and Morocco, warning that Egypt and Tunisia in particular could see peril to their banking sectors, which hold a large share of the public debt.

Egypt is also heavily dependent on tourism from Russia, which has helped its tourism industry recover from the Covid-19 pandemic, giving the country extra cause for alarm.

Global inflation and supply chain issues stemming from the pandemic have also raised the price of pasta in Egypt by a third over the last month. Cooking oil was up. Meat was up. Nearly everything was up.

But most important, bread, the cost of which had already risen by about 50 percent at non-subsidized bakeries over the last four months; a five-pound note (about 30 cents) now buys only about seven loaves of bread, down from 10, bakery employees said.

Article source: https://www.nytimes.com/2022/02/25/world/middleeast/in-north-africa-ukraine-war-strains-economies-weakened-by-pandemic.html