War in Ukraine causes food shortages in Arab countries as wheat prices soar

War in Ukraine causes food shortages in Arab countries as wheat prices soar

Russia’s invasion of Ukraine has made life even more difficult for Fadia Hamieh, a Lebanese university professor who was already struggling to make ends meet in a country with a failing economy.

Since the beginning of March, flour has disappeared from stores and the price of bread has increased by 70%. “Supermarkets hoard the basics and then resell them at higher prices,” Hamieh said.

Even before the Ukraine crisis, Lebanon was in the throes of financial collapse; its currency has lost more than 90% of its value since 2019. With more than 70% of its wheat imports coming from Ukraine, consumers have suffered another blow.

Hamieh, whose monthly salary has fallen from the equivalent of $1,500 to a pittance of $200, now faces the added burden of high bread prices and shortages of staple foods. “Every time I go to buy things for the family, I get depressed. We had to cut back on so many things,” she said.

The situation in Lebanon is perhaps more precarious than elsewhere in the Arab world due to the country’s crippling economic crisis. But across the region, grains and vegetable oil from Ukraine and Russia are essential to national diets, and the war has stoked concerns about food security and political stability.

Although grain prices have fallen from record highs reached immediately after the Russian attack, uncertainty surrounding exports from both countries has kept wheat prices two-thirds higher than a year ago. Sharp food price spikes are closely linked to social instability. A food crisis in 2007-2008 caused by droughts in major wheat and rice producing countries and soaring energy prices sparked riots in more than 40 countries around the world.

The United Nations’ International Fund for Agricultural Development said the impact of rising food prices and crop shortages was already being felt in the Middle East and North Africa. “This could cause an escalation of hunger and poverty with disastrous consequences for global stability,” said Gilbert Houngbo, President of IFAD.

With the exception of the oil-exporting Gulf states, most Arab countries have weak economies, large budget deficits, and depend on subsidized food and energy. Besides Lebanon, Ukraine is one of the main wheat suppliers to Tunisia, Libya and Syria. Egypt, the world’s largest wheat importer, depends on Russia and Ukraine for more than 80% of its wheat purchased on international markets, according to data from UN Comtrade.

Chart showing the countries most dependent on Ukrainian wheat exports

Governments in the region have sought to contain the ripple effect by attempting to source more food from other producers in Europe, rationing and imposing export bans on staples, including flour, pasta and lentils. Lebanon has earmarked all of its flour supplies for bread production, and the government has also raised the price.

Economists say grain and energy importers such as Egypt, Tunisia and Morocco will see their budgets come under pressure as they spend more on imports and subsidies.

Kristalina Georgieva, Managing Director of the IMF, warned earlier this month that countries in the Middle East and North Africa that depended on imported energy and food would feel the effects of the war “quite severely”.

“I worry about Egypt,” she said of the impact of high food and energy prices on the country when asked about the war in Ukraine and the IMF’s response. “We are already engaged in discussions with Egypt on how to target vulnerable populations and vulnerable businesses,” she said.

Egypt has taken drastic measures to ensure that its subsidized bread program, which feeds 70 million people, will stay on course despite the war. Officials say they have four months of wheat in their granaries and the local harvest will start in mid-April.

On Monday, the government devalued its currency and raised interest rates as the central bank tried to contain the impact of war in Ukraine on the economy. The country also set a cap on the price of unsubsidized bread, which had skyrocketed in recent weeks.

Chart showing the countries most dependent on Russian wheat exports

Egypt has tried to diversify its sources of supply and plans to buy 6 million tons of local wheat from farmers this year, equivalent to 60% of the expected harvest and an increase of more than 50% compared to to 2021.

As an incentive, the government has increased the price it pays farmers and set a minimum level of grain that farmers are required to sell to the state. They will also need permission to transport or sell any wheat that exceeds this quota. Failure to comply may result in a prison sentence.

Goldman Sachs analysts said the biggest near-term risk to Egypt’s outlook in the coming months will come from “adjustments in domestic commodity prices, particularly any adjustment in bread subsidies.”

The subsidized bread program is at the heart of the Egyptian social protection system. Successive regimes have been reluctant to raise the price of bread for fear of triggering social unrest.

In Tunisia, the expectation of further shortages and the approach of the holy month of Ramadan, when food consumption increases, prompted panicked shoppers to empty supermarket shelves.

Having taken power eight months ago, suspending parliament and the constitution, Tunisian President Kais Saied has yet to draw up a plan to deal with the deteriorating economy. In recent months the government has sometimes fallen behind in paying public sector salaries and there were shortages of flour even before the war.

“It’s very dangerous for the president,” said Youssef Cherif, a political analyst who runs Columbia Global Centers in Tunis. “A lot of Tunisians feel their lives are getting worse and while we don’t see a lot of people blaming the president directly, I think that’s coming.”

Additional reporting by Hiba Tlili in Tunis and Chloe Cornish in Mumbai