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Ukraine’s war rages on North African economies | Economy

A woman and her son next to hundreds of plants in Africa.
A woman and her son next to hundreds of plants in Africa.Jerônime Derigny

The tanks that Vladimir Putin brought into Ukraine in the early hours of February 24 began to shake the pockets of millions of people in North Africa and the coffers of the states of the region. The effect is noticeable in different intensities from the Moroccan Atlantic coast to the Suez Strait. And it has been one product in particular, wheat, that has captured much of the attention and concern. In an area where the rise in the price of bread is a very sensitive issue and is at the origin of various social unrest, each government is now trying to secure its supplies of cereals, of which Russia and Ukraine contribute almost 30% of world exports, according to the company specialized in agriculture Gro Intelligence.

In Egypt, a country of more than 100 million souls, about 70 million people are entitled to access to subsidized bread. In addition, the country is the largest importer of wheat in the world, and Russia and Ukraine ensured around 60% of its needs, according to the United States Department of Agricultureso any variation becomes a real puzzle for the authorities.

Cairo has already had to cancel its last two wheat tenders because the price was over 60% higher than expected, and the Ministry of Trade and Industry on Thursday banned the export of wheat, flour, pasta, lentils and beans for three months. In addition, the authority of the Ministry of Supply that is in charge of basic products has had to ask for help to pay for its purchases, according to the local press, and non-subsidized bread has risen 50%. The Finance Ministry, for its part, estimates that rising wheat prices will add an extra 860 million euros to the country’s import bill in the current fiscal year, which ends in June. And a cut in bread subsidies, which have a great political charge, but which at this point no one rules out, added to the strong inflation that is expected, could cause strong social unrest.

Despite this sum of setbacks, the authorities insist that, for now, there is no risk of shortages. Hussein Abu Saddam, president of the Farmers’ Union, told EL PAÍS that Egypt has strategic wheat reserves for four months and that the local harvest will begin in April, which will give another six months a break. “[El problema] it is that we imported 80% of the wheat from Russia and the Ukraine and we need reserves for next year, so we must go to alternative markets such as America, Australia or France, which have higher prices,” he points out. Likewise, Abu Saddam points out that the Government is also encouraging the cultivation of local wheat.

On Morocco, the government spokesman, Mustafá Baitas, tried to minimize this Thursday at a press conference the effect of the war on the economy of his country. He pointed out that Russia and Ukraine are, after France, the second and third supplier of common wheat and barley in Morocco. Russia, with 25% and Ukraine, with 11%. But he clarified that most of the quantities planned to be imported have already been acquired and the rest can be obtained in other markets.

However, in Morocco the weak point is fuel, since imports of oil, gas and coal represent 6.4% of GDP, almost double that of Egypt. In one year, a liter of diesel went from costing 8.7 dirhams (80 euro cents) to exceeding the 10 dirhams barrier in November 2021 and 10.9 dirhams (one euro) in February 2022. Several carrier unions have launched a five-day strike to demand a ceiling on gasoline prices from the government.

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Days before the war began, on February 24, several protests had been registered in Morocco due to inflation. Vegetables and meat were even looted in the Alhad souk, in the Kenitra region, 50 kilometers north of Rabat.

Algeria could be the great beneficiary of this conflict, since it is a country whose economy revolves around the export of oil. However, an analyst, who requests anonymity, indicates from Algiers that there are other sectors that will be affected. “We import almost everything. And we will pay dearly for the bill for wheat and meat. We also import equipment for the industry. And prices have gone up.”

“The rapid rise in energy prices has been a boon to an Algerian regime desperate for legitimacy,” notes Andrew Farrand, an Atlantic Council researcher specializing in North Africa, who points out that “buying social peace back to be feasible all of a sudden.” “But this relief may be temporary. Algeria relies on international markets for much of its food supply, [y] record grain prices are a major concern for a nation that imports millions of tons of wheat a year,” he warns.

On Tunisia, the effect of the war is already being felt, according to the Tunisian economist Radhi Meddeb, who explains by email that the State budgets were established with a hypothesis of the barrel at 75 dollars. Now it is already at 112 dollars. Regarding cereals, Meddeb highlights the country’s dependence on it: “International prices increased by an average of 30% in 2020 and increases of 50% are now expected. With the rise in price, Tunisia runs the risk of not finding the quantities of grain it needs.”

The Tunisian tourism sector, already hit by the pandemic, is also suffering. “The war and the fall of the ruble can leave us without 650,000 tourists, especially Russians and to a lesser extent Ukrainians, whose arrival would be very good for us, after two years of the pandemic.”

Critical scenario in Sudan

On Sudan, which has been plunged into a deep economic crisis since a military coup in October, the situation is worse than in the rest of the North African countries. Already in January, the prices of basic foodstuffs in the country were between 100% and 200% higher than the previous year, and between three and four times higher than the average of the last five years, according to the Network of Information Systems. Famine Early Warning.

The country only produces a quarter of the wheat it consumes and imports the rest, especially from Russia, which has recently sent 20,000 tons of this product to Sudan to give air to the coup generals, with whom they maintain good ties. However, the increase in flour and gas prices, and the recent depreciation of the local currency, has already started to translate into an increase in the price of bread. “There are not even queues, prices are high and people are looking for alternatives,” Mosab Awad, owner of several bakeries in the state of Khartoum, tells this newspaper.

In the case of Libya, which depends largely on wheat from Ukraine, the Ministry of Economy has stressed that the country has enough strategic reserves for at least a year, and that they do not expect the local market to be significantly affected by the war. Even so, the months prior to its outbreak there had been occasional supply problems, at least in the capital, Tripoli. The president of the Superior Committee for the Follow-up of Bakeries and of the trade union in Libya, Ali Aboaza, assures EL PAÍS that the reason is that the strategic reserves are not in the hands of the State, but of the private sector, which at times like the present takes advantage and manipulates the price.

The confidence of the latter to fulfill their part seems to be based on taking advantage of the also high oil prices, of which Libya is one of the main exporters in the world, to offset the cost of importing food. Its production, however, is proving to be unpredictable in the current context of renewed political and administrative division in the country, over which the shadow of uncertainty once again hovers.

North Africa is also entering this new scenario after the food price index of the United Nations Food Organization (FAO) registered a new historical maximum in February, even above the levels reached at the beginning of the convulsive year 2011. In this delicate context, the war in Ukraine, the impact on maritime transport, and the sanctions against Russia have only contributed to further aggravate the fragile situation.

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