Using your answer in question 5, outline how Egypt’s annual expenditure on wheat will change if wheat prices continue to surge.
Egypt is currently experiencing one of its worst economic crises. Consumer prices have been steadily rising, severely burdening Egyptian households. The information in Table 1 below refers to Egypt’s economy.
Table 1
| 2021 | 2022 | 2023 | 2024 |
Consumer Price Index (CPI) | 110.20 | 118.20 | 148.70 | 193 |
Inflation rate (%) | 4.36% | 7.26% | | |
The Russian invasion of Ukraine was a major catalyst for Egypt's economic crisis.
Egypt depends on Russia and Ukraine for 80% of its wheat imports, and disruptions in the global grain market led to wheat prices surging. Additionally, the energy crisis caused by the invasion severely impacted Egypt, as the country imports around 100 million barrels of crude oil annually, leading to increased production and manufacturing costs.
The exchange rate between the Egyptian pound and the US dollar is given by: 1 USD = 48.35 EGP
In 2022, the price of wheat per tonne was equal to 10,500 Egyptian pounds. By the end of 2023, the price of wheat increased by 31% and the volume of imported wheat decreased from 6.8 million tonnes in 2022 to 5.3 million tonnes in 2023.