Egypt's inflation hits five-year high of 25.8% in January

Higher food prices account for 32.7% of consumer price index basket

A food market in Cairo. A persistent shortage of foreign currency has caused delays in getting imports into Egypt. EPA
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Egypt's annual inflation spiked to 25.8 per cent in January from 21.3 per cent in the previous month, the highest in more than five years, according to figures released by the state statistics agency Capmas on Thursday.

The rise, the highest since December 2017, was more than expected, with economists this week having forecast a slight increase to 23.75 per cent.

The soaring inflation reflects the struggle faced by most Egyptians as they try to make ends meet on a daily basis.

Nearly 30 per cent of Egypt's 104 million people live in poverty and many more hover just above the poverty line.

Thursday's inflation figures follow a series of currency devaluations starting in March last year that stripped the Egyptian pound of nearly 50 per cent of its value.

Adding to the economic woes of the most populous Arab nation is a persistent shortage of foreign currency, causing continuing delays in getting imports into the country and subsequent shortages of some goods and manufacturing material.

The latest figures also come one day after Prime Minister Mostafa Madbouly announced his government's intention to sell stakes in 32 state-owned companies between now and the end of the first quarter of 2024.

These include three banks and two military-owned companies, as well as enterprises in insurance, energy, electricity and ports.

On Thursday, President Abdel Fattah El Sisi said the government was prepared to offer all the companies run by the military's National Service Projects Organisation to investors.

“We’re prepared to offer all the companies,” he said in televised comments.

He also floated the idea of a partnership between these companies and the private sector.

Rising inflation is mainly driven by higher food prices, which account for 32.7 per cent of the index's basket.

The price of meat and poultry, for example, increased by 18.9 per cent in January month-on-month. Dairy products and eggs were up 10.3 per cent, rising from 7.7 per cent in December.

Prices of other food items on the rise in January included oils and fats (11.1 per cent) bread and cereals (7.1 per cent) and fish and seafood (9 per cent).

"The latest inflation reading came in much higher than previously anticipated, as producers continued to raise prices, impacted by the local currency depreciation and the drop in supplies," Naeem Research said in a note on Thursday.

"We now expect urban inflation to cross 27 per cent by March, also factor in the incremental impacts of higher fuel prices [expected to be 10 per cent] into our model; in our view, requiring a hike in the policy rates of up to 200bps [basis points]."

Updated: February 09, 2023, 1:21 PM