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Containing the economic fallout of the Israel-Iran war - Egypt - Al-Ahram Weekly
The government is taking proactive measures to contain the impact of regional wars on Egypt's economy
As the Israel-Iran war took a sharp turn this week with Washington entering into a military confrontation with Tehran, fears were mounting over its economic repercussions on Egypt.
US President Donald Trump announced a ceasefire between Israel and Iran on Tuesday morning, but experts say it is still fragile and hostilities could resume at any time.
Just a few hours after the US struck three Iranian nuclear facilities on Sunday morning, President Abdel-Fattah Al-Sisi held an urgent meeting with Prime Minister Mustafa Madbouli and Finance Minister Ahmed Kouchouk.
The meeting reviewed the local supply of strategic commodities and any expected rise in the global prices of oil, shipping, and basic commodities, according to Presidential Spokesman Mohamed Al-Shennawi.
Madbouli held two urgent meetings with the Macroeconomic Stability Advisory Committee and the Crisis Committee on Sunday and Monday. He noted that there is coordination with the banking sector to provide all the foreign currency needed by the industrial sector to import required production inputs.
He told the Crisis Committee, formed last week, that the government is working to make sure that the country's stock of strategic commodities is enough to cover more than six months.
Supply and Internal Trade Minister Sherif Farouk said various measures are being implemented, including increasing stocks of essential goods and products, rationalising consumption, and monitoring markets to prevent monopolistic and hoarding practices.
Petroleum Minister Karim Badawi presented scenarios for global energy prices based on estimates from international financial institutions. 'These scenarios specifically point to expectations of rising global energy prices as a result of the Israel-Iran conflict, which has pushed crude oil prices higher over the past week,' Badawi said.
Oil prices tumbled by nearly five per cent on Tuesday after Israel and Iran agreed to a ceasefire following 12 days of conflict. Brent crude, the international benchmark, fell to $68 a barrel, below the level it was when Israel launched missiles against Iran's nuclear sites on 13 June.
Madbouli affirmed that there is close coordination between the government and the Central Bank of Egypt (CBE) to maintain stable reserves. Egypt's net foreign reserves reached a record high of $48.526 billion at the end of May, representing an increase from $48.140 billion in April.
Madbouli said that there is no cause for alarm or concern over the availability of basic goods on the local market. He noted that 'the government will continue to monitor developments at all levels and is preparing 'multiple scenarios' to handle potential outcomes.'
Madbouli cautioned that any scenario in the form of a long or wider war could trigger broader repercussions. 'All the indicators show that our economy is stable, and the measures taken so far have kept us secure in this phase of the crisis,' he said, adding, however, that any further deterioration would have an impact, and 'so we should be prepared to act to adjust our response as needed to shield Egypt's economy from external shocks.'
Madbouli suggested that the government could take tougher measures if the regional war takes a turn for the worse.
He said that factories in Egypt are operating at full capacity and that the currency remains stable, leaving no justification for any price increases. 'We have no issues with production inputs, and all supplies are secure,' he said. 'Any attempt to create a crisis out of nothing will be met with decisive action.'
Finance Minister Kouchouk affirmed that the war between Israel and Iran has not had a dramatic impact on Egypt's economy. He said in a statement on Saturday that financial conditions are under control.
'We are monitoring developments in the region closely and working proactively to meet them. We have achieved good results despite the challenges, including the negative impacts on the Suez Canal,' Kouchouk said.
Egypt's Suez Canal revenues dropped to $4 billion in 2024 from $10.2 billion in 2023 (a 60.7 per cent reduction) due to the war on Gaza and the Yemeni Houthis' attacks on ships in the Red Sea.
Egypt has faced similar challenges before with the Covid-19 pandemic and Russia's war against Ukraine, according to the finance minister, and in both cases 'we moved quickly to secure the country's basic needs'.
Mohamed Al-Manzlawi, deputy chair of the Senate's Industrial Committee, told Al-Ahram Weekly that he has high hopes that the ceasefire between Israel and Iran will not collapse.
'A long war is bad for Egypt, as its effects could make life harder for ordinary people. In particular, it could weaken the Egyptian pound, adding to the financial burdens on ordinary Egyptians who are still trying to adapt to the effects of previous depreciations,' Al-Manzlawi said.
He added that a weaker currency also means that the government will need to pay more for the import of essential goods, including fuel and wheat.
Talaat Al-Sewedy head of parliament's Energy Committee, said that every $1 increase in global oil prices adds roughly LE4 to LE4.5 billion per year to public spending and exerts more pressure on fiscal and budgetary conditions.
The government's conservative estimate for oil prices is $75 per barrel for the 2025-26 budget.
Al-Sewedy said that the drop in oil prices to $68 a barrel due to the ceasefire between Israel and Iran was an encouraging development. 'But remember that the hostilities could resume again, so we have to be vigilant and be able to adjust the budget to contain any dramatic shocks,' he said.
Al-Sewedy told the Weekly that the government has proved quick and flexible in dealing with the natural gas supply scenarios resulting from the regional war and the suspension of Israeli gas supplies to Egypt.
'One scenario involved deploying Floating Storage and Regasification Units [FSRUs] to receive, store, and convert liquefied natural gas [LNG] into usable gas for the national grid,' Al-Sewedy said.
Madbouli said during a visit to the Ain Sokhna Port on Saturday that Egypt will have three LNG regasification ships operating by early July to supply the natural gas grid, ensuring stable energy for households and industry during the peak summer demand.
* A version of this article appears in print in the 26 June, 2025 edition of Al-Ahram Weekly
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