How collapse of Black Sea grain deal impacts East Africa

The markets have continued to witness significant volatility with inflation expected to remain elevated after Russia reneged on renewing the Black Sea grain deal. This decision is anticipated to result in a spike in food prices as wheat exports stagnate, compounded by the depletion of forex reserves. Phillip Ssali, Head of Corporate Sales & Global Markets at Standard Bank Group, joined CNBC Africa to provide insights on this development and its impact on East Africa. Ssali highlighted the risk of elevated food prices due to potential restrictions on intercontinental trade, leading to limited supplies and higher inflation expectations across African countries. This shift could jeopardize the recent decrease in inflation that several East African markets had started witnessing. East African countries heavily reliant on imported food may face significant challenges as they navigate the aftermath of the Black Sea grain deal collapse and lingering effects of drought. The consequences of the deal's breakdown are expected to be felt by the common people who may experience a surge in food prices, especially in countries that depend on food imports. The situation is further exacerbated by ongoing drought conditions in certain regions of Africa, adding pressure to already high food prices. Turning to currency dynamics in East Africa, Uganda has observed a slight strengthening of the shilling attributed to seasonal factors like the coffee season and corporate tax payments. Additionally, offshore investors' interest in Ugandan treasury securities has contributed to the currency's stability. With its economy heavily reliant on agricultural exports and tourism, Uganda anticipates favorable outcomes in the forthcoming months. The country's current positioning appears promising, given the positive weather patterns and expected growth in tourism and agricultural sectors. Comparatively, neighboring Kenya is grappling with continued depreciation of the Kenyan shilling, hovering around 145 against the dollar. Despite efforts by the central bank to support the currency, the persistent decline raises concerns. Kenya's foreign reserves provide a cushion, with the recent approval of an IMF deal further bolstering market confidence. While challenges persist, indicators suggest a more positive outlook for the Kenyan economy. Looking ahead, market participants should monitor political developments, which can significantly influence investor sentiment and overall market confidence. The ongoing political climate, marked by demonstrations and uncertainty, calls for caution among traders and investors. As tensions unfold, it is crucial to exercise prudence and assess the impact of these events on trade and economic activities.