In case Ahmed Kouchouk’s warning wasn’t enough, the IMF also thinks emerging markets including Egypt will need to hedge against the economic risks associated with the war in Ukraine, IMF Director for ME and Central Asia Jihad Azour told CNBC Arabia (watch, runtime: 15:43). Egypt’s budget will likely face pressure on the back of surging commodity prices, while the decline in tourists from Ukraine and Russia — two of our most important tourism markets in volume terms — will affect economic growth, he said.

What does the IMF recommend? We need to focus on food security issues resulting from our reliance on Russia and Ukraine for wheat imports, according to Azour, and protect the most vulnerable in society by widening the social safety net. This needs to come hand in hand with measures to both curb inflation and reach our targeted 1.5% primary surplus for the current fiscal year.

What food security issue? Russia and Ukraine together account for 80% of our wheat import. The spillover effect of grain price hikes is already apparent here at home, with global price hikes threatening to cost the government up to EGP 15 bn this fiscal year in additional wheat import costs. The price of unsubsidized bread has doubled since the war broke out, and the government is soon to impose price controls on unsubsidized bread (see story below) and raised the price it will pay farmers for what it buys during this year’s domestic harvest.

The war is also threatening about a third of our inbound tourism market by volume. IMF boss Kristalina Georgieva also pointed to the threat the war poses to our tourism industry last week, noting that it “will be sharply hit by the collapse of the Ukrainian and Russian markets.”

On the bright-ish side: “The development of Egypt’s oil and gas industry will help it weather the volatile price hikes of oil due to the war,” Azour said. Oil Minister Tarek El Molla made a similar suggestion recently, saying that gas exports could compensate for part of the cost of importing oil and petroleum products. Oil has soared to 14-year highs over the past few weeks due to the war, hitting USD 130 last week before sliding more than 20% on hopes that Russia and Ukraine were moving towards a peace agreement.

Egypt has not yet approached the IMF with requests for a support package, Azour said, confirming comments by Planning Minister Hala El Said earlier in the week. We last secured from the lender a USD 12 bn facility tied to much-needed economic reforms amid the EGP flotation, followed by another USD 8 bn to support the economy through the pandemic.

Expect the IMF to cut our growth forecast next month: The IMF will likely be revising downwards its forecasts for MENA countries’ economic growth, Azour said, echoing comments made by Georgieva last week, who said it will downgrade its global growth outlook in response to the conflict. The Fund currently expects the Egyptian economy to grow at a 5.6% clip this fiscal year. It will publish its latest World Economic Outlook ahead of its Spring Meetings in April.