Currency depreciation is one of the most powerful amplifiers of commodity price shocks. When a country's currency weakens against the US dollar, every dollar-priced import becomes more expensive in local terms, even if the dollar price hasn't changed.
Consider a concrete example. If wheat costs $300 per tonne on global markets and the Egyptian pound trades at 15.7 EGP per dollar (the rate in February 2022), the local cost is 4,710 EGP per tonne. By March 2026, the pound had depreciated to 53.5 EGP per dollar — a 71% loss (Central Bank of Egypt). The same wheat now costs 16,050 EGP per tonne, a 241% increase in local terms, even if the dollar price is unchanged.
This compounding effect explains why countries with both high import dependency and weak currencies consistently appear at the top of our impact rankings. Between February 2022 and March 2026, the Turkish lira lost 69% (13.6 to 44.4 per USD), the Nigerian naira lost 70% (415 to 1,384 per USD), and the Pakistani rupee lost 37% (177 to 279 per USD).
A 2024 IMF study on Sub-Saharan Africa (WP/2024/059) found that exchange rate pass-through in the region is eight times stronger during depreciations than during appreciations. This asymmetry means that currencies falling hurts consumers far more than currencies rising helps them.
The speed of depreciation matters. Egypt’s pound devaluation in March 2024 — when the Central Bank allowed the rate to move from 30.9 to over 50 EGP per dollar — triggered net foreign outflows of approximately $4 billion from Egypt's T-bill secondary market within weeks (Central Bank of Egypt, 2026). A gradual 10% decline over a year gives importers time to adjust and hedge.
Countries that maintain currency pegs face a different set of risks. Nigeria’s naira experienced this in June 2023 when the peg was removed, causing a 49% crash that instantly repriced all imports. The parallel market gap had reached 70% before the peg was abandoned (CBN data, 2023).
In our model, the FX adjustment captures this amplification effect. Countries with stable currencies like Brazil or Morocco see their commodity shock impact limited to the global price change. Countries with depreciating currencies see the impact magnified, sometimes doubled or tripled.
Sources: Central Bank of Egypt exchange rate data. IMF Working Paper WP/2024/059 on Sub-Saharan Africa. Central Bank of Nigeria (CBN) exchange rate data. Trading Economics historical FX rates.