Oil prices staying at $122 per barrel will cost the Egyptian budget $7.2 billion, Egyptian Finance Minister has told CNBC Arabia.
Egypt’s Finance Minister Mohamed Maait said Sunday that higher global wheat prices and pressure on the Egyptian pound would burden the government with an additional $3 billion, CNBC Arabia reported.
Egypt will need around USD 10 bn next fiscal year for wheat and oil, and the country could face an extra USD 10.2 bn burden next fiscal year if wheat and oil prices remain at their current high price, Mohamed Maait said in anterview with CNBC Arabia .
Talking about the wheat bill, Maait said some USD 3 bn more would be needed for imported wheat in FY 2022-2023, split equally between public and private purchases. Maait puts current prices at around USD 500 per ton — around double the upper range of what wheat had cost us on the international markets before the recent price squeeze, he says.
Multiply the USD 250-per ton difference by around 12 mn tons we import in a year (split equally between public and private-sector purchases) for the USD 3 bn figure.
On oil, Maait said he estimates that additional oil import costs could come in at around USD 7.2 bn.
“It’s the same story as with wheat — prices have doubled on the USD 60/bbl price that the government had penciled in for this fiscal year. We import around 120 mn barrels of oil a year, making for an EGP 7.2 bn additional annual cost. Brent crude closed at USD 122 per barrel yesterday,” he said .
The Egyptian government has already estimated rising global wheat prices on the back of the war to cost it an additional EGP 15 bn this fiscal year, penciling in the cost at around USD 350 per ton. We should get clarity on when the budget for this fiscal year closes, estimated sometime in the coming months, Maait said.
According to Maait, the rising wheat prices don’t only add an additional burden on the state budget, but pressure prices in the wider market and the local currency.
The figures are higher than those penciled in for the draft FY2022-2023 budget, which is currently making its way through the House of Representatives.
The budget assumes an average price of USD 330 per ton of wheat (up from USD 255 this fiscal year), and USD 80 per barrel of oil — estimates that came in for criticism from some MPs as leading to unrealistically low allocations for state purchases in the budget.
The allocations are tentative and could still be changed up until the budget is passed, most likely before the new fiscal year begins in July.
“War in Ukraine has sent commodities prices rocketing — and we’re particularly vulnerable to the impacts,” Maait said.
As the world’s largest importer of wheat, Egyptians usually source north of 80% of our grain imports from Russia and Ukraine. Egypt is also a net oil importer, leaving the country vulnerable to the price squeeze that began as a result of a demand-supply imbalance during the post-pandemic recovery and has been exacerbated by the war, which has seen Europe pledge to wean itself off Russian fossil fuels.
Maait alleged that this crisis is not the result of “interior politics” but because of international market price hikes in wheat ang energy.
Meanwhile, some 63k tons of French wheat has landed at Red Sea’s Safaga Port, according to Al Masry Al Youm newspaper.
The shipment is part of the 350k tons of wheat from France, Russia, and Bulgaria that GASC bought in April, in its first tender since war broke out in Europe’s breadbasket.
Egypt has been suffering from a shortage of foreign currency since the coronavirus pandemic chased away many tourists, international portfolio investors withdrew funds and the Ukrainian crisis pushed up commodity import prices.