Egypt rations power to increase foreign reserves
3 Min Read
The Egyptian government is rationing energy in a bid to increase its stockpiles of hard currency.
-
Light poles in one of the streets in Sharkia governorate
Egypt has been plunged into darkness due to the crisis caused by the Ukraine war, as the government is trying to set aside some energy for export and boost its reserves of hard currency.
Egypt, the world's biggest wheat importer, was heavily reliant on Russia and Ukraine for its supplies of grain, taking in 80% of its imports from the two countries, which meant that the Ukraine war and the imposition of sanctions on Moscow took their toll on the Arab state.
In the wake of the war, Egypt went to the International Monetary Fund (IMF) for a loan. It took on the path of pumping more natural gas abroad to bolster its hard currency reserves, which drew a lot of criticism against Cairo.
The Ukraine war also affected the country's lucrative tourism sector, restricting holidaymakers to the country suffering from the COVID-19 pandemic and still trying to recover from the 2011 political crisis.
Economic growth slowed to 3.2% in the fourth quarter of 2021-2022 against 7.7% last year, although the annual expansion was 6.6%.
The Egyptian economy has taken a huge hit, with inflation reaching 14.6% in July, which prompted a hike in the price of imports and slashed forex reserves by $7.8 billion since February to $33.1 billion in July.
Egypt is currently holding talks for an IMF loan to help mitigate the fallout from the Ukraine war on the country, where 30% of its population of 103 million lives in poverty.
Biden said in July that Washington will be providing $1 billion in assistance to ease the food security situation in the Middle East, with $50 million provided to Egypt in particular.
Egypt has contracted 180,000 tonnes of wheat from India, which will be delivered in the near future, Egyptian Minister of Supply and Internal Trade Ali Moselhi said in late June.
On May 14, India imposed a ban on wheat exports to ensure the country’s food security. Consequently, the price of wheat in Europe soared to a record $455 per ton.
Less than three months into the war, Egyptian Prime Minister Mostafa Madbouly said the Egyptian economy suffered $7 billion in direct losses due to the Ukraine crisis.
The Egyptian government has adopted some measures to reduce the negative impact of global events on the economy. The measures include strengthening the private sector and localization of industry while boosting the Egyptian stock exchange.
