The Future of Food Aid: Looking at the Egypt Case

Nearly two years have passed since Russia invaded Ukraine, beginning a conflict that has had profound effects on human and economic well-being around the world. A record 349 million people across 79 countries currently face acute food insecurity– this is a 200 million person increase when compared to pre-Covid-19 levels. Russia and Ukraine are two key players in the international export of wheat, sunflower oil, and fertilizers, and their conflict has led to a global food crisis that leaves millions facing severe malnutrition. The war’s disruptions to wheat supply chains have highly impacted the country of Egypt, and there is enormous potential for the U.S. to improve the lives of their citizens and further the political impetus behind Ukraine through strategic investment in Egypt’s agriculture and food financing. This analysis serves to inform policymakers on how the future of food aid might look; particularly in a world with growing pressures on food supplies due to climate change and conflict, Egypt is an interesting case to consider. 

Since the 1940s, Egypt’s government has coordinated a bread subsidy program, through which half of the country’s total wheat is consumed and which uses three quarters of total imports. Bread is a staple in the Egyptian diet, accounting for up to 40 percent of caloric intake; their citizens consume double the global average amount of wheat per capita. This well-established program is under considerable strain as the government struggles to obtain enough wheat to meet demand as supply shrinks and prices soar. 

The conflict has shrunk available wheat supplies and has made transporting goods significantly more expensive. Egypt is paying more to ship wheat from farther away. Egyptians are some of the world’s largest consumers of wheat, but as their domestic production can’t keep pace with population growth, they are the world’s greatest importer. Despite attempts to diversify their sources, Egypt still gets over 70 percent of its wheat from sources around the Black Sea area. They are just one of 50 countries that rely on Russia and Ukraine for at least 30 percent of their wheat imports, according to the United Nations. 

Increasing domestic production is crucial for Egypt’s food security strategy. As wheat imports have become more difficult to obtain, there has been an effort to increase domestic production. The government is the only purchaser of wheat grown in the country, having prohibited selling to private markets or exporting, but still domestic production is only able to meet the needs of five months of subsidized bread production. The Egyptian government returned to some of the agricultural controls that were phased out with neoliberal reforms in the 1980s: quotas for minimum amounts of wheat that had to be sold to the government per acre, mandatory crop allocation, and additional monetary incentives for farmers. 

Fertilizers and other agri-tech solutions are key to increasing Egypt’s domestic production, especially given the country’s growing vulnerabilities as an arid climate due to climate change. The U.S. Intelligence Community has called attention to political vulnerabilities that exist due to volatile states playing an essential role in providing inputs necessary for agriculture. In their 2015 Community Assessment on Global Food Security they noted, “large exportable supplies of key components of food production—such as phosphates, potash, and fuel oil—come from states where conflict or government actions could cause supply chain disruptions that lead to price spikes.” Russia and their ally, Belarus, are key fertilizer suppliers and their costs have nearly doubled since 2020. Modern agriculture in Egypt’s arid climate is highly dependent on fertilizers to support production and the spike in its cost is quickly felt in the Egyptian market. The cost of domestic cereal production has increased in Egypt due to sharp rises in fertilizer costs.  

Americans and Egyptians have been successfully working together towards agri-tech solutions for nearly three decades. Since 1995 the U.S.-Egypt Science and Technology Joint Fund has supported high-impact research between the two countries and led to innovations such as antimicrobial textiles, more efficient solar panels, and increased wheat and citrus yields with lower fertilizer usage. Last year at COP27 the U.S. committed another four million dollars to focus developments on in health, agriculture, energy, and water tech. Grants from this fund promote cooperation and progress in areas of mutual interest and the benefits have had an impact that extends beyond the two nations to societies around the world.  

The U.S. also has significant history of trade and investment in Egyptian agriculture. Egypt is the United States’ largest export market in Africa, with an emphasis on goods like wheat and corn. Americans’ economic involvement in the country includes substantial aid for security and development projects, for example since 1978 over half a million farmers have increased their incomes due to American technical assistance.

However, the current impacts of Russia’s war in Ukraine on Egypt demand greater investment , and thus far the response by multilateral organizations, the U.S. government, and our allies can be characterized by historic financial and political commitments to those under threat and in need. Last year Secretary of State Antony Blinken convened a Global Food Security Call to Action and Global Food Security Summit, both gatherings of world leaders and foreign ministers were hosted by the United Nations (UN) and focused on tackling unprecedented global food security issues. In May, the G7 leaders initiated the Global Alliance for Food Security. In July, the U.S. Agency for International Development (USAID) announced a record commitment from the U.S. to increase children’s access to malnutrition treatment- $200 million. Throughout the previous year the U.S. made multiple increases to funding to the World Food Program, amounting to a historic $7.2 billion in funding, a $3.4 billion increase over 2021. The Egyptian government signed a $500 million loan agreement with the World Bank and a $3 billion agreement with the International Monetary Fund (IMF). These loans will finance wheat imports, support national efforts to reduce waste in the supply chain, and sustainability increase domestic production.  

Foreign assistance for food aid is usually spent in one of two ways- on investments in agricultural productivity or humanitarian assistance in the form of physical food shipments. This past year an increase in a third way emerged- supporting food-insecure countries in their efforts to cover climbing costs to import food in response to food shocks. In early 2022, the United Nations’ Food and Agriculture Organization proposed a Food Import Financing Facility (FIFF) to do just this. After its review by the International Monetary Fund, the Food Shock Window Program was approved in September 2022, initially for twelve months, to lend, provide technical assistance, and policy advice. The strength of the program is that it is designed for rapid response balance of payment needs when upper credit tranche (UCT)-quality programs are not feasible. Burkina Faso, Guinea, Haiti, Malawi, South Sudan, and Ukraine have benefited from the program so far, and it has been extended until March 2024.   

Egypt is likely to benefit from this third type of assistance model because they have experienced significant currency devaluation relative to the U.S. dollar. In the past year Egypt’s currency has lost half of its relative value. In late 2022, hundreds of thousands of tons of wheat were sitting in ports due to a shortage of foreign currency in Egypt. They have an established, robust state-coordinated food subsidy program and therefore a clear mechanism for distributing aid. They also already have a heavy reliance on imports making this form of support more critical both for them and a country like Ukraine, whose export to Egypt supports their national economy. 

Countering Russia’s significant influence in the global agricultural sphere, while also working to alleviate the food crisis, will take a sustained commitment to strategic diplomatic partnerships and supporting food systems in insecure countries. In the absence of effective food assistance, increases in malnutrition will negatively impact human health and economic development for decades to come. Egypt is experiencing challenges in feeding its citizens because they are highly dependent on wheat and fertilizer imports from both Russia and Ukraine. Yet, the U.S. and Egypt food aid policy successfully navigates this issue by leveraging effective aid financing.