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Egypt’s inflation surges to record 36.5% in July

Morocco vegetable exports Reuters/Youssef Boudlal
Prices have climbed rapidly during a foreign currency crisis that has triggered three devaluations since March 2022

Egypt’s annual headline inflation rose to a new all-time high of 36.5 percent in July, in line with analysts’ expectations, as food prices soared, data from the country’s statistics agency Capmas showed.

Month-on-month, prices rose 1.9 percent in July, down from 2.08 percent in June.

Core inflation, which strips out volatile items like food and fuel, eased slightly to 40.7 percent in July from 41 percent in June.

Prices have climbed rapidly during a foreign currency crisis that has triggered three devaluations since March 2022. Many Egyptians have seen their living standards slide.

Headline inflation was 35.7 percent in June, also a record high.

The median forecast of 15 analysts polled showed annual urban consumer inflation rising to 36.5 percent in July. The previous high of 32.95 percent was recorded in July 2017.

Food and beverage prices rose by an annual 68.4 percent in July, Capmas said.

“Food prices were mainly impacted by a 9.1 percent monthly increase in fruit prices and 4.8 percent in vegetable prices, which are largely volatile and are excluded from core CPI,” said Sara Saada of CI Capital, which had forecast July inflation of 35.4 percent.

“We expect inflation to average 32 percent in 2023, with possible upside on the continuation of the implementation of deeper fiscal reforms, including possible higher electricity tariffs and approving new telecom tariffs,” she added.

The International Monetary Fund (IMF) in December approved a $3 billion, 46-month Extended Fund Facility loan for Egypt after the Ukraine crisis exposed vulnerabilities in its economy.

The first six-month review, scheduled for last March, has been delayed pending the government fulfilling a pledge to adopt a flexible currency exchange rate and to sell more state assets.

Noaman Khalid of NBK said an unfavourable base effect from last year continued to push inflation upwards, even though the monthly rate dropped to 1.9 percent.

“If policy makers devalue the currency in the coming period in preparation to the IMF review, inflation could peak at 40 percent at the end of the year. Otherwise it should drop to 30 percent by December,” said Noaman.

NBK had forecast inflation at 36.5 percent.