Egypt Inflation Soars to 33%

Egypt’s inflation has jumped to almost 33%, the government said Thursday as Egyptians continue to brace themselves in the face of steep price hikes and austerity measures.

According to figures published by the Central Bank of Egypt, the urban annual inflation rate reached 32.95% in July—up from 29.76% in June. The announcement comes amid forecasts that the inflation rate would remain above 30 in the coming months, abcnews reported.

The central bank also said that annual core inflation increased to 35.26%, up from 31.95% in June. Core inflation excludes volatile commodities such as food and energy.

Dubai-based Arqaam Capital attributed the hike in urban inflation to the increase in fuel prices the month before. It also said a July surge in electricity prices will impact August rates.

In June, Egypt raised prices for commonly used fuel—80-octane gasoline and diesel by 55% and doubled the price of gas canisters, used in the majority of households for cooking.

The government later upped electricity prices by more than 40%, followed by surges in public transportation fares and drinking water.

“Annual inflation is expected to remain in the 31-32% range in the next two months, before starting its quick descent in November,” Arqaam said in its report, adding that it may reach low 20s by year’s end.

Earlier this week, Egypt’s government restricted access to new food ration cards, used by three-quarters of the country’s 93 million people, in attempt to cut the high subsidy bill.

The monthly income cap for those who can now apply for ration cards was set at 1,500 Egyptian pounds ($84) for private and public sector employees. The caps for other segments of the population were lower and the cards are from now on limited to families of up to four members. Current holders are not affected by the new limits.

The central bank raised its key interest rates by 200 basis points last month, seeking to ease the inflationary pressure, and is set to meet to decide on rates again later next week.

Inflation could start to cool and fall below 20% by the end of 2017 as the effects of the currency float begin to fade, allowing the central bank to cut interest rates, a research note from Capital Economics said on Thursday.