Posts

,

Being Poor in Egypt: The Threat of Inflation and Currency Depreciation

Being Poor in EgyptThere had been a measured decrease in extreme poverty levels in Egypt between 2017 and 2020, from 6.2% to 4.5%. Thus, it appeared that the issue of poverty in Egypt was gradually declining. Notwithstanding, the country now finds itself in a financial crisis, which record levels of inflation and subsequent depreciation of its currency (the Egyptian Pound) further fuels. Core inflation in Egypt measured a year-on-year price level increase of 31.2% in January 2023. Moreso, the value of the Egyptian Pound capitulated against the US dollar and has subsequently lost about 50% of its value.

Poverty in Egypt: A Resurging Problem

Poverty is resurging in Egypt, with approximately one-third of the population living in impoverished conditions and millions more struggling financially. The nation’s economy continues to face significant challenges, including rising inflation that hampers citizens’ economic and social rights, as well as their access to sufficient food and essential services. In August 2022, annual inflation surged to 15.3%, compared to just over 6% in the same month the previous year.

Furthermore, the Egyptian pound recently hit a historic low against the strengthening U.S. dollar, with an exchange rate of 19.5 pounds to $1. Consequently, this depreciation has widened trade and budget deficits, as the diminishing foreign reserves have resulted in a nearly 10% decline in purchases of grain and fuel in March 2022. For impoverished Egyptians, these economic challenges make life significantly more difficult, as they struggle to meet their basic needs, particularly regarding food. Additionally, the devaluation of the Egyptian Pound in the currency market poses heightened difficulties for the country in importing goods.

Responses

The International Monetary Fund (IMF) has provided some of the much-needed financial aid in Egypt. A recent agreement for a 46-month loan program valued at $3 billion with the Egyptian government aims to attenuate at least some of the monetary issues in the country, including its outstanding debts. The theory behind this is that if Egypt staves off the fears of its defaulting on the national debt, the run on its currency will end, holding greater confidence in the Egyptian economy to stay solvent. If this can be achieved imports would become cheaper and capital will again be able to flow into the country boosting supply shortages. Simply put, this effort aims to increase the Egyptian Pounds value against hard currencies such as the US Dollar and Euro, thereby enabling local individuals and businesses to more easily buy foreign goods and capital that cannot be sourced from within Egypt.

Other nations and organizations have chipped in with a specific focus on agricultural and food issues in Egypt. Japan recently pledged $3.8 million in aid through the Food and Agricultural Organization (FAO) focused on agricultural development in Egypt. Furthermore, the World Bank approved a $500 million project in Egypt aimed at ensuring all vulnerable families in the country can afford food. This served to strengthen Egypt’s resilience to food crises and support reforms in food security policies. Additionally, the project has tasked itself with monitoring and improving nutritional outcomes in the country.

Looking Ahead

Despite the challenges Egypt faces with its financial crisis and increasing poverty rates, international support is being extended to address these issues. The IMF’s loan program aims to alleviate monetary challenges and restore confidence in the Egyptian economy. Furthermore, contributions from Japan and the World Bank specifically target agricultural development and food security, providing hope for improved resilience and access to essential resources for vulnerable populations in Egypt. These collaborative efforts hold the potential to mitigate the impact of poverty and contribute to a brighter future for the country.

– Christopher Maddocks
Photo: Flickr

, , ,

The World Bank’s Efforts to Mitigate Food Insecurity

efforts to mitigate food insecurityAccording to the Council on Foreign Relations, about 135 million people experienced severe food insecurity before the COVID-19 pandemic. The pandemic has worsened this crisis with less access to quality food and prices skyrocketing. COVID-19 has already destroyed decades-worth of work made toward reducing global hunger. There are already predictions that millions of children will suffer more from malnutrition, obesity and stunting. Global hunger is an impediment to international development, increasing tensions within developing countries.

How Food Insecurity Worsened During COVID-19

The U.N.’s World Food Programme (WFP) states that millions of citizens across 43 developing countries face an “emergency phase of food insecurity in 2021.” The majority of those experiencing food insecurity in those countries are either refugees or anyone forced to migrate.

The Center for Strategic and International Studies reported that 272 million people are food insecure one year into the pandemic. Many believe that higher food insecurity rates worldwide occurred due to the shortages from panic buying and stockpiling. However, the U.N. Food and Agricultural Organization (FAO) determined that agricultural production reached its highest level. In 2020, the world produced 2.7 billion tons of the most commonly grown crops. The reality is that disruptions within the supply chain are the root cause of this worsening issue.

Actions of the World Bank

As part of its efforts to mitigate food insecurity during COVID-19, the World Bank increased funding for more effective agricultural systems in Guatemala to reduce disruptions in the supply chain. Its assistance also aimed to help alleviate the food insecurity caused by economic challenges and droughts. The World Bank helped Liberia by incorporating a Contingency Emergency Response Component that allows the government to respond to the needs of those at a higher risk of food insecurity. The component also helps increase crop production and helps normalize the supply chain there.

How to Overcome Economic Challenges

The pandemic also worsened the economic situation in developing countries. People received fewer remittances preventing them from accessing essential goods. Latin America has been most impacted by reduced remittances. However, food prices in other regions facing conflict became higher than many people’s daily salaries, making the situation difficult to overcome.

Haiti is a country with the highest food insecurity rates and faced severe impacts from the reduced remittances. The pandemic and reduced remittances hurt farmers the most. The World Bank assisted by providing programs with enough funding for farmers to produce enough crops for a two-year time frame. The programs will also help farmers incorporate safety precautions into their practices during the pandemic.

Other Efforts to Mitigate Food Insecurity

The World Bank’s other efforts to mitigate food insecurity included issuing a transfer of funds to families with food insecure infants and toddlers in Tajikistan to alleviate malnutrition. It sent food for 437,000 citizens in Chad facing food insecurity. The organization also provided additional funding that went toward addressing the concerns that the pandemic caused in Rwanda.

Accomplishments Occurring with the World Bank’s Help

The World Bank also provided more certified seeds to local communities in Afghanistan and helped farmers produce more yields than before. The U.S. sent $87.8 million to help provide more equipment for dairy and poultry farmers in Bangladesh. The World Bank’s programs in India resulted in further women’s empowerment with the establishment of women’s self-help groups that work with hygiene, food administration and storage. As of 2021, there are 62 million women that participate in these groups.

The World Bank also reports that farmers in developing countries face food insecurity and works to alleviate their distress. The organization helped Cambodia incorporate new agricultural practices that led to farmers receiving higher incomes with increased productivity. The World Bank also taught farmers in the Kyrgyz Republic the proper practices to grow more crops while conserving water. Eventually, more than 5,000 farmers gained an income that allowed them to buy essential goods.

The World Bank’s efforts to mitigate food insecurity in developing countries are effective so far. These international programs brought more farmers out of poverty and further combat global hunger. Many of these countries made commendable progress with this support, which is a significant step toward future development.

– Cristina Velaz
Photo: Flickr