World Economy

Egypt’s Urban Consumer Price Inflation Jumps to 23%

Egypt’s Urban Consumer Price Inflation Jumps to 23%Egypt’s Urban Consumer Price Inflation Jumps to 23%

Egypt’s annual urban consumer price inflation jumped for the second month since the pound was freely floated last year to reach 23.3% in December from 19.4% in November, the official CAPMAS statistics agency said on Tuesday.

Egypt abandoned its currency peg of 8.8 to the US dollar on Nov. 3 in a dramatic move that has since seen the currency depreciate roughly by half. It accompanied the move with a 300 basis point interest rate hike to fight inflationary pressures, Reuters reported.

Despite the hike, inflation is rising sharply and is expected to climb further this year as the government pushes on with economic reforms, including fuel subsidy cuts and the implementation of a value-added tax, that helped it secure a $12 billion International Monetary Fund loan program.

In cities and towns, food and beverage inflation touched 28.3% in December. Healthcare inflation stood at 32.9% while transportation was 23.2%.

President Abdel Fattah al-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public.

Sisi predicted last month that the Egyptian pound would strengthen in the coming months and promised to ensure basics were available and affordable.

The government has expanded its social security network and some 70 million Egyptians have access to state subsidized bread.

Egypt’s non-oil business activity shrank for the 15th consecutive month in December as inflation caused purchase costs to rise at a near-record pace.

Economists said rising inflation would erode spending power, hit economic growth and prompt further hikes to interest rates, which are already up to 15.75%.

Egypt’s central bank has held interest rates steady at two monetary policy meetings following its flotation and some economists expect further rate hikes this year.

High annual headline inflation is expected to continue for several years before dropping to single-digit levels by the end of 2019 or early 2020, Reham ElDesoki, senior economist with Dubai-based Arqaam Capital, said in a research note, Bloomberg reported.

The reforms, which helped the nation finalize a $12 billion International Monetary Fund loan, have created new hardships in the country of 92 million people, about half of whom live near or below the poverty line.

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