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Egypt’s economy reels from Ukraine warSurging food prices epitomise deep impact of conflict on Nor

Rising bread prices sparked by Russia’s invasion of Ukraine have bitten into the purchasing power of consumers in Egypt, a leading importer of wheat from the former Soviet states © Khaled Desouki/AFP/Getty

In a vegetable market in the Cairo district of Manial, mother-of-two Fatma Ibrahim is shocked by the rise of prices since the start of the Russia-Ukraine war and anxious about how she can afford to feed her family during the impending holy month of Ramadan.

“I am barely managing,” said the jobless divorcee. “Cooking oil has increased so much and the simplest dish requires it. I no longer buy cauliflower or aubergine because frying them uses up so much oil. Also the price of flour shot up suddenly.” The daily Ramadan fasts are broken by nightly feasts and many buy in more food. “I don’t know how we will cope in Ramadan.”

The increasing prices at the market stalls in Egypt epitomise the deep impact the war has had on the North African country’s economy. Soaring oil and commodity prices have hit one of the world’s biggest wheat importers hard, as has the loss of tourists from Russia and Ukraine. This comes on top of billions of dollars of outflows in recent months from Egyptian debt held by foreigners. Last week, Cairo asked the IMF for assistance, the third time in six years. Egypt is already one of the biggest borrowers from the fund after Argentina.

The war in Ukraine had “heightened Egypt’s external vulnerabilities”, Fitch Ratings said this month. “Egypt will suffer reduced tourism inflows, higher food prices and greater financing challenges as a result of Russia’s invasion of Ukraine,” added the rating agency, saying that “the crisis aggravates Egypt’s vulnerability to outflows of non-resident investment from its local-currency bond market”.

The outflows had been spurred by rising interest rates globally combined with concerns about Egypt’s economy in the absence of an IMF programme and perceptions that the currency was overvalued, Fitch said. To shore up its pressured finances, and restore confidence in its economy that is heavily reliant on “hot money”, or attracting foreigners into the short-term local debt market Egypt devalued its pound currency last week just before it announced it was seeking IMF support.