Amid the ongoing conflict in Ukraine, Western financiers have scaled back their investments in Egypt, removing billions of dollars from the Egyptian economy and leading to a significant decrease in the Egyptian pound, the country’s currency.

The pound, which normally trades at around fifteen per dollar, has lost roughly one-eighth of its value over the past week. On Monday, it rose to eighteen per dollar, its highest rate since mid-2017. This increase is certain to make Egyptian imports, particularly grain, more expensive—a significant problem for Egyptian president Abdel-Fattah el-Sisi, whose government provides heavily subsidized grain to Egypt’s lower class.

In an effort to shore up the pound’s value, the Egyptian central bank announced on Monday that it would increase the country’s interest rates by 1 percent, slowing down borrowing and curbing inflation. Egyptian officials also indicated that they would consult the International Monetary Fund (IMF) for financial aid, according to Al Jazeera.

While the pound’s poor performance against the dollar will make imports more expensive, it could also attract further investment in the country, as speculators could take advantage of the relatively undervalued pound. However, other financiers have observed that large-scale investment could lead to further inflation, undoing the benefits of foreign investment. Egypt’s inflation rate is currently estimated at 8.8 percent per year, according to the country’s central bank. This number is near the upper bound of the bank’s acceptable range of between five and nine percent, and further increases could lead it to institute harsher measures, such as further increases in interest rates.

The financial unrest in Egypt is largely the result of the ongoing conflict in Ukraine, which Russia invaded on February 24. The fighting has affected both nations’ ability to export wheat—a major problem for both Ukraine and Russia, as they are two of the world’s largest exporters of wheat. Egypt, the third-most populous country in Africa, is the world’s largest importer of wheat. Cairo has historically sourced most of its wheat from Russia and a smaller amount from Ukraine, and the disruption to Russian supplies from the war and subsequent sanctions regime has doubled the annual cost of Egypt’s imports to $5.7 billion, according to the International Food Policy Research Institute.

Egypt’s economy has remained sluggish since the beginning of the COVID-19 pandemic, as the country is normally highly dependent on revenues from tourism—an industry that has all but ground to a halt.

Trevor Filseth is a current and foreign affairs writer for the National Interest.

Image: Reuters.