Egypt announces billion-dollar programme to ease effects of Ukraine war

Prime minister says government's top priority is to protect country's most vulnerable and control prices

Egypt's traditional baladi flatbread, a staple for most of the country's 102 million people. Its price has been fixed by the government. AP
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Egypt on Monday announced a multibillion-pound relief package to help the most vulnerable of its 102 million people weather the economic hardships from Russia’s invasion of Ukraine.

The package, worth nearly 20 billion pounds ($1.1bn), includes tax breaks, wage rises and pensions, as well as broadening a state support programme for disadvantaged families, Prime Minister Mustafa Madbouly said.

The package also includes the creation of a 130bn pound special fund for mitigating the effects of the Ukraine war on the Egyptian economy.

“This money is designed for the state to use to contain the largest part of the fallout while the citizens endure a tiny part,” Mr Madbouly said.

Most Egyptians have already been hit hard with a sharp rise in food prices estimated at about 20 per cent, which was caused by the disruption of global supply caused by Ukraine war and higher energy prices.

File photo: A man sits in front of his shop in old Islamic Cairo. Reuters

As the world's largest importer of wheat, Egypt relies on Russia and Ukraine for about 80 per cent of its supplies and a 73 per cent of its sunflower oil, for which Ukraine is world leader.

“We would like to assure local and foreign investors that the state remains committed to safeguarding the gains of the economic reform programme,” Mr Madbouly said.

He was referring to a scheme launched by President Abdel Fattah El Sisi in late 2016 to overhaul the economy .

The reforms won praise from foreign donors and international financial agencies but hit hard Egypt’s middle class and the poor.

They were introduced in exchange for a $12bn loan from the International Monetary Fund and include lifting state subsidies on basic items, a currency devaluation and new taxes.

“Our top priority is to stabilise Egypt’s economic conditions and the price of basic commodities and job opportunities,” Mr Madbouly said.

The Egyptian pound lost more than 10 per cent of its value against the US dollar on Monday. EPA

The relief measures coincided with a sharp drop in the value of the Egyptian pound against the US dollar in what Central Bank Governor Tarek Amer described as a “correction” of the exchange rate, which would make the country more competitive.

The correction, which Mr Amer said reflected world and local developments, saw the US dollar closing on Monday at around 18.2 pounds, up from around 15.7 pounds the previous day.

The Finance Ministry, meanwhile, announced it would maintain the customs exchange rate at 16 pounds to the dollar, in a move designed to keep prices in check.

Inflation in Egypt stood at 10 per cent in February, according to the country's statistics agency, reaching an almost three-year high and driven by higher food prices.

Updated: March 21, 2022, 11:00 PM