CAIRO (Middle East Eye) – Egypt’s economy is sorely feeling the effects of the Russia-Ukraine war, which has devastated the country’s sources of foreign currency and caused the flight of billions of dollars from the Egyptian market.
The Egyptian government has said it’s planning for a worst-case scenario, and is in talks with the International Monetary Fund (IMF) about potential funds in addition to technical support to hedge against the economic effects of the Ukraine conflict if it is prolonged.
Despite the recent sharp decline of Egypt’s net foreign assets (NFAs), there’s a sense of optimism as Cairo turns to neighboring Arab states for support in bringing its economy back on track.
Just days following Russia’s invasion of Ukraine, foreign investors fleeing emerging markets sold around $1.19bn of Egyptian treasury bonds.
The war in Ukraine has left Egypt facing higher costs for its substantial wheat import needs as well as a loss in tourism revenue from Russian and Ukrainian visitors to Red Sea resorts.
Tourists from Russia and Ukraine make up the bulk of visitors to the Arab country, traditionally constituting almost a third of the 12 million tourists who visited in peak years. A sizeable portion of the nation’s agricultural exports, including potatoes, also go to Russia and Ukraine.
In February, Egypt’s net foreign assets went sharply down by $3.29bn. The drop was the latest in a series and the highest in seven months, bringing total NFAs to minus $2.9bn, according to the Central Bank of Egypt.