Egypt inflation surges to highest since July 2017 on food prices

Inflation in urban parts of Egypt rose to its highest since July 2017, pulled by a surge in food prices linked to the devaluation of the country’s currency.

Consumer prices climbed an annual 32.7 per cent in March, less than forecast by most economists and up from 31.9 per cent the previous month. It was driven upwards by a 62.9 per cent rise in food and beverage costs, the state-run statistics agency CAPMAS said Monday.

On a monthly basis, prices grew 2.7 per cent, compared with 6.5 per cent in February.

Yet even as price increases quickened, they did so at a slower pace than the month before — a development that’s in part a result of statistical effects because declines in the currency a year ago created a high base of comparison.

Behind the acceleration is a recent plunge in Egypt’s pound that’s filtering through the economy. A hike in fuel prices and rising demand around the holy month of Ramadan, which began in the fourth week of March and is marked by large meals and gatherings, were among other contributing factors.

Egypt, a major importer of wheat and other commodities, has devalued its pound three times over the past year, driving up the cost of most foreign-origin goods already under pressure from trade restrictions and the economic fallout of the Ukrainian crisis.

Soaring prices are an especially painful blow in the Middle East’s most populous country where about half its 104 million people live near or below the poverty line. The government has said tackling the issue is a top priority.

The central bank on March 30 raised interest rates by 200 basis points in its latest bid to contain price pressures. It was the year’s first hike after the regulator hit pause in February, saying it was assessing the impact of a wave of increases in 2022.

Higher rates, though, offer little in the way of an immediate solution for a country facing its worst foreign-exchange crisis in years.

Pressure is building again on the pound as Egypt races to find foreign investment to tackle its external funding gap, including through an ambitious plan of selling stakes in at least 32 companies.

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