Egypt has asked for support from the International Monetary Fund as the country struggles to fend off the economic fallout of Russia’s invasion of Ukraine, the fund said.

Cairo’s public finances are under increasing pressure as Moscow’s offensive on Kyiv has sent grain prices soaring and pushed up oil prices. Egypt is the world’s largest wheat importer, relies heavily on supplies from Russia and Ukraine, and has a subsidized bread program that feeds 70 million people.

Its plight underscores how the war has spread to Arab and African countries that depend on food and energy imports.

“The rapidly changing global environment and spillover effects related to the war in Ukraine are creating significant risks for countries around the world, including Egypt,” Celine Arad, head of the IMF mission to Egypt, said in a statement released late Wednesday. challenge.”

“In this context, the Egyptian authorities have asked the International Monetary Fund (IMF) to support the implementation of their comprehensive economic plan.”

Egypt, the most populous country in the Arab world, has benefited from previous IMF loans and programs. In 2016, it experienced a severe foreign exchange crisis after emerging from the post-revolutionary political turmoil of 2011 and secured a $12 billion loan over three years.

It also received $8 billion in 2020 to combat the impact of the pandemic, making it one of the fund’s largest borrowers after Argentina. When the deal was struck in 2016, it devalued the currency by half against the dollar.

Analysts had been anticipating the latest announcement after the country devalued its currency on Monday, in a move seen as a prelude to discussions with the fund over a potential loan. Egypt also announced a package of tax cuts and increased social spending worth $7 billion.

The Egyptian pound has fallen 14% against the dollar since the central bank of Egypt allowed its value to slide on Monday, citing exchange rate flexibility acting as a shock absorber. The dollar rose to 18.4 pounds on Monday from 15.66 pounds on Sunday.

Goldman said the devaluation “paved the way for the IMF’s program, which we believe will help cement confidence in Egypt’s fiscal and reform trajectory”.

Arad’s statement welcomed the devaluation and the expansion of the social safety net, adding: “Continued exchange rate flexibility is critical to absorb external shocks and safeguard financial buffers during these uncertain times. Prudent fiscal and monetary policy to maintain macroeconomic stability.”

The war has also hit the country’s tourism industry, a major source of foreign exchange, as it deters tourists from Russia and Ukraine – both important markets for the industry.

Foreign debt investors have also withdrawn billions of dollars from Egypt in recent months, adding to pressure on its currency. “There was a net outflow of approximately $5 billion between September and December, with further outflows following news of the conflict in Ukraine,” Fitch Ratings said in a report last week.

“In our view, these outflows reflect tightening global financial conditions, as well as investor concerns about Egypt’s external funding needs in the absence of an IMF program, the impact of rising inflation on Egypt’s real interest rates, and the possibility of Egypt’s exchange rate. Sustainability levels, after substantial real appreciation in recent years.”