Business

War in Ukraine triggers food shortages in Arab countries while wheat prices soar

Russia’s invasion of Ukraine has made life even harder for Fadia Hamieh, a Lebanese university lecturer who was already struggling to make ends meet in a country with a troubled economy.

Since the beginning of March, flour has disappeared from the shops and the price of bread has risen by 70 percent. “Supermarkets stockpile staple foods and then sell them at higher prices,” Hamieh said.

Even before the Ukraine crisis Lebanon was in the grips of a financial meltdown; its currency has lost more than 90 percent of its value since 2019. With more than 70 percent of its wheat imports coming from Ukraine, consumers have been dealt another blow.

Hamieh, whose monthly salary has fallen from the equivalent of $1,500 to a meager $200, now faces the added burden of high bread prices and shortages of basic necessities. “Every time I go shopping for family things, I get depressed. We had to cut so many things,” she said.

The situation in Lebanon could be more precarious than elsewhere in the Arab world because of the country’s crippling economic crisis. But across the region, grain and vegetable oil from Ukraine and Russia are vital to national nutrition, and the war has fueled fears for food security and political stability.

Line chart of CBOT Wheat ($ per bushel) showing wheat prices rising

Although grain prices have fallen from record highs reached immediately after the Russian attack, uncertainty about exports from both countries has kept wheat prices two-thirds higher than a year ago. A sharp increase in food prices is closely linked to social instability. A food crisis in 2007-08, caused by droughts in key wheat and rice-growing countries and a surge in energy prices, sparked unrest in more than 40 countries around the world.

The United Nations International Fund for Agricultural Development said the effects of rising food prices and crop shortages are already being felt in the Middle East and North Africa. “This could lead to an escalation of hunger and poverty with dire consequences for global stability,” said Gilbert Houngbo, President of IFAD.

With the exception of the oil-exporting Gulf States, most Arab countries have weak economies, high budget deficits and depend on subsidized food and energy. Alongside Lebanon, Ukraine is a leading wheat supplier to Tunisia, Libya and Syria. Egypt, the world’s largest wheat importer, relies on Russia and Ukraine for more than 80 percent of its wheat purchased in international markets, according to UN Comtrade data.

Chart showing the countries most dependent on Ukrainian wheat exports

Governments across the region have tried to stem the domino effect by trying to source more food from other producers in Europe, rationing staples like flour, pasta and lentils, and imposing export bans. Lebanon has dedicated all of its flour supplies to bread production and the government has also increased the price.

Grain and energy importers like Egypt, Tunisia and Morocco will see their budgets stretched more as they spend more on imports and subsidies, economists say.

Kristalina Georgieva, Managing Director of the IMF, warned Earlier this month that countries in the Middle East and North Africa that depended on energy and food imports would feel the effects of the war “quite badly”.

“I’m worried about Egypt,” she said of the impact high food and energy prices are having on the country when asked about the Ukraine war and the IMF’s response. “We are already in talks with Egypt on how to target vulnerable populations and vulnerable businesses,” she said.

Egypt has taken drastic measures to ensure its subsidized bread program, which feeds 70 million people, stays on track despite the war. Officials say they have four months’ worth of wheat in their granaries, and the local harvest will begin in mid-April.

Chart showing the countries most dependent on Russian wheat exports

Egypt has sought to diversify its sources of supply and plans to buy 6 million tons of local wheat from farmers this year — 60 percent of the expected harvest and a more than 50 percent increase from 2021.

As an incentive, the government has increased the price it pays farmers and set a minimum amount of grain that growers must sell to the state. You also need a permit to transport or sell wheat in excess of this quota. Failure to comply could result in imprisonment. The government on Monday put a cap on the price of unsubsidized bread, which had skyrocketed in recent weeks.

Analysts at Goldman Sachs said the main near-term risk to Egypt’s outlook in the coming months would come from “adjustments in domestic commodity prices, particularly an adjustment to bread subsidies.”

The subsidized bread program is at the heart of Egypt’s social protection system. Successive regimes have been wary of raising the price of bread for fear of sparking social unrest.

In Tunisia, expectations of further shortages and the approaching holy month of Ramadan, when food consumption surges, have caused panicked shoppers to clear supermarket shelves.

Tunisian President Kais Saied, who took power eight months ago and suspended parliament and the constitution, has yet to come up with a plan to confront the deteriorating economy. In recent months, the government has sometimes defaulted on public sector wages, and there were flour shortages even before the war.

“This is very dangerous for the president,” said Youssef Cherif, a political analyst who heads the Columbia Global Centers in Tunis. “Many Tunisians feel their lives are getting worse and while we don’t see many people blaming the president directly, I think that’s coming.”

Additional reporting from Hiba Tlili in Tunis and Chloe Cornish in Mumbai

https://www.ft.com/content/b76d3414-4f11-4e46-9271-9309c06237df War in Ukraine triggers food shortages in Arab countries while wheat prices soar

Adam Bradshaw

TheHitc is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehitc.com. The content will be deleted within 24 hours.

Related Articles

Back to top button