Ukraine War Strains North Africa Economies

Ukraine War Strains North Africa Economies

CAIRO — On the way to the bakery, Mona Mohammed realized Russia’s war on Ukraine might have something to do with her.

Ms. Mohammed, 43, said she rarely pays attention to the news, but as she walked through her working-class Cairo neighborhood of Sayyida Zeinab on Friday morning, she overheard a few people fretting about the fact that Egypt imports most of its wheat from Russia and Ukraine.

War meant less wheat; war meant more expensive wheat. War meant that Egyptians whose budgets were already crimped from months of rising prices might soon have to pay more for the round loaves of aish baladi, or country bread, that contribute more calories and protein to the Egyptian diet than anything else.

“How much more expensive can things get?” Ms. Mohammed said as she waited to collect her government-subsidized loaves from the bakery

Russia’s invasion of Ukraine this week threatens to further strain economies across the Middle East already burdened by the pandemic, drought and conflict. As usual, the poorest have had it the worst, reckoning with inflated food costs and scarcer jobs — a state of affairs that recalled the lead-up to 2011, when soaring bread prices helped propel anti-government protesters into the streets in what came to be known as the Arab Spring.

In a region where bread keeps hundreds of millions of people from hunger, anxiety at the bakeries spells trouble.

In Egypt, the world’s top importer of wheat, the government was moving in the wake of the Russian invasion to find alternative grain suppliers. In Morocco, where the worst drought in three decades was pushing up food prices, the Ukraine crisis was set to exacerbate the inflation that has caused protests to break out. Tunisia was already struggling to pay for grain shipments before the conflict broke out; the war seemed likely to complicate the cash-strapped government’s efforts to avert a looming economic collapse.

Between April 2020 and December 2021, the price of wheat increased 80 percent, according to data from the International Monetary Fund. North Africa and the Middle East, the largest buyers of Russian and Ukrainian wheat, were experiencing their worst droughts in over 20 years, said Sara Menker, the chief executive of Gro Intelligence, an artificial intelligence platform that analyzes global climate and crops.

“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 because of 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.

Egyptians, about a third of whom live on less than $1.50 a day, rely on bread for a third of their calories and 45 percent of their protein, according to the Food and Agriculture Organization, a United Nations agency.

Government officials said on Thursday that Egypt had enough grain reserves and domestically produced wheat to last the country until November. But because of rising import prices President Abdel Fatteh el-Sisi last year announced that Egypt would raise subsidized bread prices this year, risking public fury.

“Of course I’m worried,” said Karim Khalaf, 23, who was collecting and stacking baladi loaves as they slipped out of the oven, steaming slightly, in a bakery in Sayyida Zeinab on Friday morning. “My salary hasn’t changed, but now I’m spending more than I’m making.”

Morocco, where the all-important agriculture sector employs about 45 percent of the work force, is facing an economic crisis precipitated by global inflation, a surge of food and oil prices, and the worst drought in three decades.

Anti-government protests that erupted on Sunday suggested that many Moroccans have lost patience with their six-month-old government as they struggle to make ends meet two years into a pandemic that annihilated the once-lucrative tourism industry.

“I hustled for a long time and I was patient, but I am left with nothing,” said Mina Idrissi, 48, who attended a protest in the capital of Rabat and who works several jobs, including as a housekeeper, in the nearby city of Sale. “For two weeks, I couldn’t even afford to buy cooking oil. Does this government not realize that we are suffering?”

In the weeks before the protests, a series of videos circulated on Moroccan social media that only served to heighten the sense of distress. One video showed people rioting over food prices in a market in the city of Kenitra near Rabat.

Morocco’s was a foreseeable crisis, experts said. Located in a climate change hot spot, the country’s rainfall has dwindled dramatically in recent years, and may decline by 20 to 30 percent by the end of the century, according to the World Resources Institute.

“It’s a simple reality that has been ignored for decades,” said Najib Akesbi, an economist in Rabat.

The government has reacted with Band-Aids.

Last week, the royal court announced a $1 billion plan to alleviate the impacts of the drought on farmers by providing financial aid, water management and livestock food supply.

But analysts said such measures would not compensate for decades of misguided economic management that prioritized water-intensive industries and produced food for export while leaving the rest of the country dependent on imported wheat — some of it from Russia and Ukraine — and other food.

No Middle Eastern nation wants to become like Lebanon, which has seen its currency and economy undergo catastrophic collapse since late 2019. Lebanon imports more than half of its wheat from Ukraine, and is already talking to other countries like India and the United States about wheat purchases, the country’s economy minister, Amin Salam, told Reuters on Friday.

Recent turmoil in the country has already jacked up the price of bread. To help mitigate the effects of the economic implosion, the government has reduced subsidies on a range of goods, including bread, some types of which now cost five to nine times more than they did in summer 2019, according to government statistics.

Some analysts have warned that growing economic pressures could leave Arab governments vulnerable to the kind of social unrest that roiled the region during the Arab Spring.

In Tunisia, where food prices have climbed as public finances wobble, President Kais Saied is struggling to maintain his popularity after seizing power last summer with promises to fix Tunisia’s economy. The government is desperate for an International Monetary Fund bailout, but such a deal would likely force it to take unpopular measures like cutting public wages and subsidies.

Egyptians ground down by the economy attempted to rebuke Mr. el-Sisi in a series of anti-government demonstrations in September 2019, only to be met with a swift crackdown. Still, years of government repression have persuaded many to make their peace with how things are, however hard.

“We’ll have to resort to welfare, which is basically begging,” said Osama Ezzat, 60, a day laborer who was pushing cardboard boxes in a hand cart past the Sayyida Zeinab bakery on Friday. “It’s tough, but when you compare us to countries around us, at least we’re stable.”

Vivian Yee reported from Cairo and Aida Alami from Rabat, Morocco. Nada Rashwan contributed reporting from Cairo, Ben Hubbard and Hwaida Saad from Beirut, Lebanon and Ana Swansonfrom Washington.

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