An impending food crisis

Russian war causes major disruptions in international grain supply (AFP)

Two weeks ago, I wrote a post on a social network in which I referred to the deal to buy the Abu Dhabi Sovereign Wealth Fund, part of the Egyptian government in many large profitable companies in the Egyptian market, a deal that was announced after The Central Bank of Egypt lowered the price of the pound against the dollar by more than 15% directly.

The main purpose of what I wrote was to draw attention to the fact that Emirati entities are controlled by Egyptian companies, especially in the banking sector, but I also pointed out that the announcement of the deal after the pound devaluation was a grant to the Emirates reducing the price by 15%. sale of Egyptian companies, which was agreed upon.

A trusted friend shared what I wrote in a dialog box on the WhatsApp app involving me with a group of employees in the Egyptian banking sector. Emirates was carried out before the pound price dropped! When I asked him to show any document proving this, I got no response and so far all the sites I have searched show that the agreement has not been implemented yet.

The “reduction” given to the companies sold was not my main issue, especially with the announcement that followed the entry of Qatar with investments worth five billion dollars, and the Saudis about ten billion dollars, and maybe the extra amount from the Emirates, and of course the price of the new dollar against the pound will be the price Who will carry out all those deals.

The truth is that the reduction was not only in the agreements through which the Gulf nationals increased their presence in the Egyptian market, but was in all assets denominated in Egyptian pounds.

All assets, all assets and all income in local currency have been depreciated by 15% so far and it is no secret that this has happened as a result of not the best policies in recent years, as foreign borrowing has been supported . to stabilize the price of the pound against the dollar, while he continued The current account bleeding and all the fear that these policies will continue again, let’s wait for the consecutive drop in the price of the pound and then everything related to the Egyptians, as happened over the last few decades.

Expectations currently show that the Federal Reserve will raise interest rates on its funds six times before the end of the year, with a total of no less than 1.75% and could reach 2%, in addition to another 0.75% next year, for exceed US interest rates on 3% Bank funds for the first time since the pre-global financial crisis in 2008, and at such levels, it is rare for hot money to invest in emerging markets, including the Egyptian market, naturally. .

With the continuing complexity of the situation in Ukraine, the region known as the “world wheat basket” was hit by major unrest that affected its wheat, barley and corn sales in most countries, and the battles caused “the loss of crops, the destruction of grain stocks and potentially serious consequences for international grain supplies. ” As the New York Times says.

US media say Russian forces have prevented Ukrainian exports destined for export from reaching the Black Sea, through which they are supposed to be exported, while the Ukrainian government has confirmed that it has blocked the export of some crops to ensure domestic demand is met in the event that the war continues for a long period.

This came at a time when Western economic sanctions against Russia were undermining its major contributions to global grain supplies, or at best a large portion of it, with the head of the United Nations World Food Program, David Beasley, warning of a “global food crisis that weighs more. Its effects.” Everything we have seen since World War II. “Before the invasion of Ukraine, Russia was the largest exporter of grain in the world.

Previous developments show that the coming period may be difficult for many emerging economies, as their foreign investment, whether cash or direct investment, is declining due to high US interest rates and counterparts. in emerging markets, and the growth that usually results in “market risks” In emerging markets, energy prices imported from most of these countries rise, affecting their budgets, increasing pressure on their current account and more behind on their currencies, and consequently their wealth and the income of citizens and their assets can be exposed to large, renewable declines in their value in dollars!

The problem this time seems complex, as the domestic currencies of food-importing countries weaken and food prices themselves rise, if they are available to many of these countries. Some analysts even considered that countries that import their food “may collapse in the coming period, if food prices continue, namely, cereals are rising.

The next period will require many countries to rely on domestic sources of wheat and energy, and if these things do not happen overnight, we must immediately begin preparing for them.

Wheat cultivation is no longer a luxury and the equation of comparative advantages imposed on us to import wheat has certainly changed with increasing transportation costs, harvest prices on the world market, and the impossibility of importing sometimes. as happened after the war in Ukraine.

To achieve self-sufficiency in wheat in Egypt, every dollar used to import non-essential goods must be saved, as we say in Egypt that what the family needs is forbidden to the collector and what we need to import wheat . should not be used to import cars, cell phones and dog food, even the series of priorities mismatch that lost billions and missed opportunities to improve course will not continue.

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