Rising food and fuel prices destabilize countries on the brink

Now, more than a decade after the Arab Spring, global food prices are rising again. They had already reached their all-time high earlier this year when the pandemic, inclement weather and the climate crisis rocked agriculture and threatened food security for millions of people. Then came Russia’s war in Ukraine, making the situation much worse – while also causing a spike in the cost of the other daily essential fuel.

The combination could spark a wave of political instability as rising costs push people already frustrated by government leaders over the edge.

“It’s extremely worrying,” said Rabah Arezki, a senior fellow at Harvard’s Kennedy School of Government and former chief economist at the African Development Bank.

“I don’t think people have felt the full impact of rising prices yet,” said Hamish Kinnear, Middle East and North Africa analyst at Verisk Maplecroft, a global risk advisory firm.

Lessons from the Arab Spring

In the run-up to the anti-government protests known as the Arab Spring — which began in Tunisia in late 2010 and spread across the Middle East and North Africa in 2011 — food prices rose sharply. The food price index of the Food and Agriculture Organization of the United Nations reached 106.7 in 2010 and jumped to 131.9 in 2011, then a record.

“Mohamed Bouazizi didn’t set himself on fire because he couldn’t blog or vote,” wrote one Emirati commentator in January 2011, referring to the street vendor whose protest action helped spark the revolution in Tunisia and, ultimately, the Arab world. “People are setting themselves on fire because they can’t bear to see their families languish, not from grief, but from cold, stark hunger.”

Conditions in individual countries differed, but the bigger picture was clear. Rising wheat prices were a big part of the problem.

The situation is now even worse than it was then. Global food prices have just hit a new record. The FAO food price index released Friday reached 159.3 in March, up nearly 13% from February. The war in Ukraine, a major exporter of wheat, maize and vegetable oils, as well as severe sanctions against Russia – a major producer of wheat and fertilizer – are expected to lead to further price hikes in the coming months.

“Forty percent of Ukraine’s wheat and maize exports go to the Middle East and Africa, which already suffer from hunger problems and where further food shortages or price hikes could cause social unrest,” said Gilbert Houngbo, head of the International Fund for Agriculture. Development, said last month.

The pain is exacerbated by the rise in energy prices. Global oil prices are almost 60% higher than a year ago. The cost of coal and natural gas has also risen.

Many governments struggle to protect their citizens, but fragile economies that have borrowed heavily to weather the 2008 financial crisis and pandemic are the most vulnerable. As growth slows, damages their currencies and makes it harder to pay off debt, it will be difficult to sustain subsidies for food and fuel, especially if prices continue to rise.

“We are now in a situation where countries are in debt,” Arezki said. “As a result, they have no buffers to try and contain the tensions that will arise from such high prices.”

According to the World Bank, on the eve of the invasion of Ukraine, nearly 60% of the poorest countries were “already in debt or at high risk of doing so”.

Where tensions simmer

Asia: In Sri Lanka, an island nation of 22 million people, an economic and political crisis is already boiling, with protesters taking to the streets in violation of the curfew and government ministers resigning en masse.

Struggling with high debt and a weak economy that relies on tourism, Sri Lanka was forced to replenish its foreign exchange reserves. That prevented the government from making payments for major imports such as: energy, creating devastating shortages and forcing people to queue for fuel for hours.

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The leaders have also devalued the currency, the Sri Lankan rupee, as they try to get a bailout from the International Monetary Fund. But that only made inflation at home worse. In January it reached 14%, almost double the price increases in the United States.

Meanwhile, the Pakistani Khan awaits a vote of no confidence in the country’s parliament on Saturday. Though his political troubles go back years, he is now fighting claims of economic mismanagement as the cost of food and fuel rises and the government depletes its foreign exchange reserves.

“The magnitude of the economic chaos has united opposition to Imran Khan,” said Kinnear of Verisk Maplecroft.

Middle East and Africa: Experts are also watching for signs of political unrest in other Middle Eastern countries, which rely heavily on food imports from the Black Sea region and often provide the population with generous subsidies.

In Lebanon, where nearly three quarters of the population lived in poverty last year as a result of political and economic collapse, between 70% and 80% of wheat imported comes from Russia and Ukraine. Important grain silos were also destroyed in the 2020 explosion in the port of Beirut.

And Egypt, the world’s largest consumer of wheat, is already seeing tremendous pressure on its massive bread subsidy program. The country recently set a fixed price for unsubsidized bread after prices rose, and is instead trying to secure wheat imports from countries like India and Argentina.

With an estimated 70% of the world’s poor living in Africa, the continent will also be “highly exposed” to rising food and energy prices, Arezki said.

Droughts and conflict in countries such as Ethiopia, Somalia, South Sudan and Burkina Faso have led to a food security crisis for more than a quarter of the continent’s population, the International Committee of the Red Cross said this week. The situation threatens to worsen in the coming months, it continued.

Political instability has already developed in parts of the continent. A series of coups have taken place in West and Central Africa since early 2021.

Europe: Even countries with more developed economies, which have larger buffers to protect citizens from painful price increases, will not have the resources to fully absorb the blow.

Thousands of protesters gathered in cities across Greece this week to demand higher wages to curb inflation, as France’s presidential elections shrink as far-right candidate Marine Le Pen implements her plans to lower the cost of living. President Emmanuel Macron’s government said last month it is considering issuing food stamps so that middle- and low-income families can afford to eat.

— Jessie Yeung, Rhea Mogul and Sophia Saifi reported.