Egypt's wheat import bill poses significant challenges in 2024

Flat bread is a staple of the Egyptian diet which is the largest consumer of wheat in the world (Photo by Shutterstock).

Egypt consumes 100 billion loaves of bread annually. This, along with the conflict in Sudan, results in many challenges for the country, writes Ahmad Abdel-Rahman.

Egypt's wheat import bill is significant as it is the largest importer of wheat in the world. Consequently, the country has become increasingly vulnerable to global price fluctuations, which is the result of the large gap between domestic production and consumption. This has occurred amid efforts to increase production to reduce the import bill, and to reduce the burden of collecting dollars in exchange for scarce foreign exchange resources.

From January to November last year, Egypt imported USD3.9 billion worth of wheat, compared to USD3.18 billion in the same period of 2021. The country's total import bill was USD88 billion, according to NCA data issued by the Central Agency for Public Mobilization and Statistics (CAPMAS).

However, this figure is likely to increase, as new estimates by the US Department of Agriculture showed that Egypt would likely see an increase in wheat imports and an increase in consumption in the fiscal year 2023-2024.

Egypt annually produces 100 billion loaves of bread, at a rate of 275 million loaves per day at a subsidised price, according to data from the Information Center of the Council of Ministers (ICCM). The country has raised the allocations for subsidising food commodities, such as bread, to reach EGP90 billion (USD2 billion and 912 million dollars) in the current budget. 

Consumption gap

The Egyptian Cabinet estimates the country's expected consumption of basic commodities in the new fiscal year 2024 will reach 20.400 tonnes compared to 20.250 million tonnes for the current year, as a consequence of the conflict in Sudan. This has economic repercussions on Egypt, the northern neighbour of the African country.

The US Department of Agriculture's report on grains, entitled "'Global Markets and Trade", points out the challenges of production and consumption facing the largest importer of wheat in the world.

The American report shows that Egypt is expected to remain the largest global importer of wheat next season, with total imports of 12 million tonnes instead of the 11 million tonnes that were imported in 2022-2023. This draws attention to the issue of the expected displacement from Sudan of the bloody conflict between the army and the Rapid Support Forces. This presents a challenge for Cairo, along with Egypt's continued population growth and the challenges of the local currency. These challenges have occurred as a result of the sharp shortage in the US dollar which needs to increase its imports of wheat.

Corn stresses

The Egyptian budget may also be burdened by the expected corn imports next season, according to the report of the US Department of Agriculture. The report expects that the country, the largest importer of corn in North Africa, will import 8.5 million tonnes, an increase of 21 per cent over the current year. This is expected to happen even though the country has many economic challenges.

As for Egypt's draft budget for the new fiscal year, which will enter into force on the first of next July, the global price of a tonne of wheat is estimated to be USD40, compared to USD330 in the current budget, according to statements by the head of the Plan and Budget Committee in the Egyptian Parliament, Fakhry al-Fiqi.

However, a package of government decisions last month aimed at reducing the country's exposure to global markets, should stimulate local production. There will be an additional incentive for each grower to supply wheat for the 2023 season, with the price increasing by about EGP1,500 (USD48.54). Additional restrictions on the use of the corn as animal food will also be imposed, and transportation from one place to another without the approval of the Ministry of Supply will also be prohibited. It also limits its marketing to government companies.

The scarcity in Egypt of US dollars weakened the Egyptian currency, following a period of monetary tightening initiated by central banks and led by the Federal Reserve Board of the US at the end of 2021. This resulted in an increase of USD20 billion in government debt by the end of the first quarter of 2022,  and led to the decline of the Egyptian pound against the dollar. The US dollar increased by 97.7 per cent from March 2022 and the Egyptian currency officially declined against the US dollar, from USD15.75 dollar in March 2022 to EGP24 against the dollar. lt reached an average of USD30.85 per dollar last May.

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Saturday, 30 September 2023