9:33 AM Rising oil and wheat prices... What are Egypt's tools for dealing with the crisis? | |
Rising oil and wheat prices... What are Egypt's tools for dealing with the crisis? Wheat prices in the world got out of control due to the repercussions of Russia's war on Ukraine, which provide about 30% of global supplies of this commodity (Al-Jazeera) 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.
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 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." The consequences of the crisis and ways to hedge 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.
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.
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: Replacing the power generation from gas and diesel with alternative energy.
Hot money out
The agency added that many investors are concerned that emerging markets will be more vulnerable to any shocks caused by disruptions to trade with Russia, including the resulting increase in the prices of some primary commodities.
Two options for facing the crisis 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.
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