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Spiralling costs of fertiliser and debt service are damaging agriculture and forcing cuts in health and education budgets
African states are facing 'a Catch-22 situation' as the war in Europe is driving up the cost of food and the cost of growing it locally, according to Ahunna Eziakonwa, UN Assistant Secretary General and Director of the UN Development Programme's Regional Bureau for Africa.
Russia's war on Ukraine is set to unleash a food and energy poverty crisis in Africa, UN officials say.
In 2020, African countries imported $4 billion worth of agricultural products from Russia, 90% of which was wheat. A handful of countries are highly exposed. Russia says the claims of crisis are confected by western states (Dispatches 21/4/22, Russia opens diplomatic front against the West for global food crisis).
Egypt is the world's largest importer – some 80% of its wheat comes from Russia and Ukraine. It also spends $955 million a year on wheat subsidies. Other countries that import large quantities of wheat from Russia include Benin, Cabo Verde, Mauritania, Senegal, Guinea, Sierra Leone, Ghana, Nigeria, Cameroon, Côte d'Ivoire, Mali, and Liberia.
Wheat and maize supplies are down and prices are rising fast. But wheat and maize account for less than 10% of household budgets in most African countries. The bigger problem, say UN economists, is imported inflation, triggering a general increase in prices.
The conflict has already led to a 21% increase in the price of fertiliser, and higher prices reduce farm yields, undercutting African countries' ability to feed their citizens (AC Vol 63 No 7, Continental ties tested in a zero-sum game). Last week, Nigeria had to purchase emergency potash supplies from Canada.
International financial institutions don't expect African states to start defaulting on debt in the short term as few countries in the region have to make big principal repayments to commercial creditors this year. That gives creditors and debtor country officials more time to work out a new structure. But so far, progress has been slow.
The more immediate fear is the growing percentage of national budgets allocated to servicing foreign loans. The proportion of revenues servicing foreign loan repayments hit 16.5% last year, compared with the 12.5% average in other emerging markets.
According to the IMF, Ghana's external debt-service costs 44% of government revenues. In Cameroon, Ethiopia and Malawi, it is about 25%. That, coupled with increased domestic interest rates following rate rises in the United Kingdom and the United States, will put further pressure on debt burdens and access to credit, the UN fears.
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