Egypt on Thursday reported a further rise in inflation on the back of higher food prices, as President Abdel Fattah El Sisi made a spirited defence of his government’s policies in the face of criticism of how it is handling the economy.
Inflation in urban areas climbed 14.6 per cent in August 2022, the highest level in four years, the state’s statistics agency Capmas said.
The latest inflation figures underline Egypt’s deepening woes as the country of 103 million people struggles to keep its economy afloat after the devastating impact of the coronavirus pandemic and the fallout from the Russia-Ukraine war.
The increase also comes amid intensifying speculation that Egypt was ready to allow its overvalued Egyptian pound to rise further but gradually depreciate to secure a fresh loan from the International Monetary Fund.
A deal with the Washington-based lender and a more flexible exchange mechanism could potentially restore interest in Egypt’s debt market, from which $20 billion quickly exited the country after Russia’s February invasion of Ukraine created uncertainty in emerging markets. It would also unleash a new round of price increases.
A shortage of foreign currency in Egypt — deepened by lower tourism revenue and a higher import bill — over the past six months has led to severe restrictions on imports, leading factories and retailers to complain that production and sales have been hurt due to undelivered inputs.
The country's central bank has, meanwhile, been allowing the pound to weaken against the dollar by less than 0.01 pounds ($0.0005) per day on average since a new central bank governor, Hassan Abdalla, was appointed on August 18.
On Thursday, Capmas said food and beverage costs, which make up the largest single component of the inflation basket, jumped 23.1 per cent on a monthly basis.
In televised comments from the Suez Canal city of Ismailia, Mr El Sisi on Thursday warned against what he called a campaign by unnamed parties to cast doubt on the government’s handling of the economy.
He also ordered Prime Minister Mustafa Madbouly to organise an economic conference by the end of the month to discuss the country’s economic problems, emphasising that government critics should be invited to take part.
The president defended the mega infrastructure projects his government embarked on shortly after he took office in 2014, saying they were not a luxury or possible to put off.
“The thing that worries me the most is that the narrative [by government critics] is shallow,” he said.
“They say it is not the time to do this [infrastructure projects]. They don’t know what nation-building really is about and they want to debate me and the government?
“I could not have told the Europeans that we can produce renewable energy and export it to them without the infrastructure to control the power network.”
The president was referring to an ongoing project worth $3 billion to build 47 power stations across Egypt that would ensure better control of the country’s grid.
Mr El Sisi, a retired army general who has made overhauling the economy a priority, did not name the critics taking the government to task over the economy.
However, in recent weeks, several economic analysts and academics have taken advantage of the government’s seeming tolerance of dissent in recent months to write scathing criticism of the state’s spending priorities.
They argued that Egypt would have been better prepared to deal with the crisis had it not spent so much on upgrading infrastructure, including more than a dozen new cities.
In April, Mr El Sisi called for a national dialogue to review policies and produce recommendations with the participation of the opposition, which appears to have also emboldened many to air their views on the government’s handling of the economy.
The dialogue remains in the preparatory stage.
“Anything we do is not something we decide on after we have a chat about it. We are talking about the involvement of international consultancies,” Mr El Sisi said.
Addressing Egyptians, he said: “Support the country that you are living in and where your dreams are. Don’t quit on your dream or allow them to make you despair.”