Egypt requested IMF assistance this week as Russia’s invasion of Ukraine has put the economy under stress, raising concerns about popular discontent and default in the world’s largest importer of wheat. The country’s third request in five years reflects a weakening currency, ballooning deficit, and balance of payments pressure as the Russia-Ukraine war has sent oil and grain prices soaring and the key tourism sector reeling, reports the FT’s Heba Saleh.
The price of bread is especially sensitive in a country where roughly 70 million people rely on subsidized bread, with 85% of wheat coming from Ukraine and Russia. Rising food prices are regarded as one of the broad conditions leading to the 2011 uprising that ousted former president Hosni Mubarak.
In a frantic response, the government imposed new price controls on unsubsidized bread. The central bank also devalued the currency, which fell over 10% this week, to protect precious FX reserves while raising interest rates by 1 percentage point at a surprise meeting—the first increase since 2017