Egypt’s annual urban inflation rose last month to its highest level in six years, mostly on the back of soaring food prices linked to the decline in the value of the local currency, the nation's state statistics agency Capmas said on Monday.
Inflation climbed to 32.7 per cent in March from 31.9 per cent the previous month, it said.
While the rate of increase was below analysts’ forecasts, it is expected to hit consumers hard in a country where half of the 104 million population are poor or hovering just above the poverty line.
On a monthly basis, prices grew 2.7 per cent in March, compared with 6.5 per cent in the previous month. The slower pace of increase is partially statistical because declines in the currency a year ago created a high base of comparison.
The latest annual inflation figure is narrowly below the all-time high of 32.952 per cent in July 2017, less than a year after Egypt devalued its currency by half as part of a $12 billion support package offered by the International Monetary Fund.
The milder increase in inflation compared to the previous two months partially reflected a slower rise in food prices, regional investment house Naeem said in a research note.
It said it expected a “shift towards disinflation” in April, partly due to food prices cooling off after Ramadan.
“Our near-term view on inflation, however, does not yet accommodate for another round of EGP [Egyptian pound] devaluation. Assuming the scenario of the currency being depreciated by another 10 per cent post-Eid [Al Fitr], annual inflation could head back upwards to 33-34 per cent by the end of June,” it said.
Egypt has devalued its currency three times since last March, slicing the pound's value by nearly 50 per cent.
But a persistent shortage of foreign currency and the subsequent delays in getting imports into the country have continued to play havoc with the economy, placing the pound under continuing pressure.
Egypt, the most populous Arab nation, imports roughly half of its food.
It is one of the world’s largest wheat importers, with bread the main staple for the overwhelming majority. At least 70 million Egyptians buy bread at a heavily subsidised price.
Contributing to the rise in March’s annual inflation was an increase in fuel prices last month and higher-than-usual demand for food items during Ramadan, which began in the third week of last month.
The government blames the country’s economic woes entirely on the fallout from the Russia-Ukraine war, but critics claim that significant spending on national infrastructure projects over the past decade, excess borrowing and lack of transparency have been contributing factors.
However, President Abdel Fattah El Sisi, a former general who has been in charge of the economy since taking office in 2014, is confident that the country will pull through the crisis.
Earlier this year, in a bid to secure foreign currency, his government announced plans to offer stakes in 32 state enterprises, including banks and military-owned companies, to investors.
It has also resorted to unorthodox methods to secure foreign currency, dimming street lights and the illumination of state buildings in major cities to make more of the natural gas fuelling power stations available for export.
The El Sisi government also began to charge tourists in dollars or euros for their train rides and, in a bid to shut down a foreign currency black market, created tougher penalties for anyone dealing in dollars outside banking channels.
The pound, meanwhile, remains under pressure, with the dollar fetching 36 pounds on the black market compared to about 31 in the banks.