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RUSSIA-UKRAINE CONFLICT TO LEAD TO DECLINE IN SUGARCANE EXPORTS

By SIFISO NHLABATSI | 2023-01-27

The persistence of the Russia-Ukraine crisis could generate more inflation and contribute to a decline in agricultural production and sugarcane exports in the country.

This was disclosed during a workshop hosted by UNDP Eswatini and the Economics Association of Eswatini at Mountain View hotel yesterday.

The discussions centred on the economic shocks resulting from the Russia-Ukraine war. It was disclosed that in an interconnected and globalised world, Eswatini, like other developing countries that have economic, security and diplomatic partnerships with the rest of the world, including Russia and Ukraine, was not spared the effects of this conflict in the heart of Europe.

According to the discussions, Eswatini is a net importer of cereals, mostly maize, rice and wheat, with imports satisfying about three quarters of domestic consumption needs, and thus suffered the rise in the price of these commodities following the Ukraine war. Some of the affected productsinclude, wheat products, sunflower-soya-bean oil, maize products, and rice which constitutes more than 60 per cent of the food basket.

It was further disclosed that  a policy brief issued in June 2022 by UNDP assessed the economic impacts of the war for the country through two main canals, the increase of the price of petroleum products, foods, fertilizers and other raw materials, impacts on the four macroeconomic accounts: government financial operations, monetary sector, external sector, and real sector. It was said the policy brief also addressed potential social impacts and the Government and development Partners response to this crisis.

UNDP Senior Economic Advisor for Eswatini and Lesotho, Souleman Boukar said globally, the policy briefly emphasised that overall, the impact on inflation is moderate (-0.1 per cent and 3.9 per cent respectively in monthly and annual variation of the consumer price index), but the persistence of the crisis could generate more inflation and contribute to a decline in agricultural production and sugarcane exports (33 per cent) through the increase in fertilizer prices (already +76 per cent in May 2022 from last growing season), as well as a decline in public revenues and expenditures and economic growth (forecast of 1.8 per cent in 2022, after 2.1 per cent in 2021).

Boukar said concerning specifically fertilizers, there was a price increase of 76 per cent from the last growing season. 

He said the global fertilizer supply was highly concentrated with Russia as the lead producer, for which many countries rely for over 50 per cent of their fertilizer supply. “According to the ministry of agriculture, high price and scarcity of fertilizer and chemicals in Eswatini will result to lower yields as farmers can employ rationing strategies which will compromise crop management practices thus affecting crop yields. Also, farmers might be cheated in buying fertilizers without nitrogen, resulting to less production and productivity,” he stated.

Not all hope is lost as according to the economist, the Ukraine war can present an opportunity for Eswatini's revenue increase through South African palladium exports. He said out of gas, the world needed palladium to make electronics and automobiles, of which Russia was the top producer.

Boukar said South Africa was the world's second-largest producer of this metal and sanctions on Russia could push it to the top spot.

The economist said in June 2022, Eswatini obtained resources from SDGs Fund for the implementation of a project which was aimed at creating an evidence-based and shared understanding of the current and potential impacts of the current global crises of food, energy and finance, their potential interaction with existing vulnerabilities and their implications for Eswatini and serve as a basis for accelerated national preparedness and response plan.

He said the project would have three phases which would include, a rapid country Assessment (RCA) on the food, energy and finance crises, their relevance and interaction with existing risks and vulnerabilities in Eswatin.

 he added that guided by the rapid analysis, national stakeholders including development partners would be engaged to prioritise an inventory of short, medium and long-term gender sensitive interventions for food-energy-finance crisis which built on existing programmes for deployment by government and the third phase was the pilot phase which would entail the implementation of selected short-term impactful integrated gender responsive interventions addressing the food-energy-finance nexus.

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