CAIRO (AP) — Egypt continues to battle surging inflation amid a dramatic slide of its currency as many Egyptians struggle with price hikes, the country’s statistics bureau said Tuesday.
The state-run Central Agency for Mobilization and Statistics released figures showing that the annual inflation was at 21.9% last month, up from 19.2% in November. That’s compared to 6.5% in December 2021, before inflation ballooned in 2022, following the outbreak of Russia’s war on Ukraine that rattled the world economy.
Prices in Egypt rose across many sectors, from food items and medical services to housing and furniture. Food prices increased by 4% on the average in December, with fruits and dairy products leading the list with 7.6% and 6.4% spikes, respectively.
The higher inflation has inflicted heavy burdens on consumers, especially lower-income households. Nearly 30% of Egyptians live in poverty, according to official figures.
Jason Tuvey, an analyst with Capital Economics, a London-based service that provides in-depth economic analysis, said the jump in inflation was the highest since the end of 2017 and predicted more hikes.
“With the pound having weakened even further since the turn of the year, inflation will continue to pick up over the coming months,” he said.
Most of Egypt’s more than 104 million population has suffered from price hikes since the government embarked on an ambitious reform program in 2016 to overhaul the country’s battered economy. That program included painful austerity measures like flotation of the Egyptian pound and the slashing of subsidies for fuel, water and electricity.
The economy was also hit hard by the coronavirus pandemic, and the fallout from the war in Ukraine. Egypt is the world’s largest wheat importer, with most of its imports having traditionally come from eastern Europe.
On Monday, President Abdel Fattah el-Sissi described the situation as “very difficult,” urging people to trust his administration. The government has sought to curb state spending, halted the implementation of costly new projects that consume foreign currency, and ordered state agencies to embark on austerity measures.
Decisions in recent months by the country’s Central Bank to raise its main interest rate and devalue the Egyptian pound have set off an economic shock that hit millions who found their savings running low as the cost of living surged.
The measures were meant to fight increasing inflation and meet requirements of the International Monetary Fund for a bailout loan amid a shortage of foreign currency. Last month, the Central Bank announced it aims to bring down inflation to about 7% by the fourth quarter of 2024, though it wasn’t clear how that would happen amid the current trends.
The IMF approved the $3 billion support package for Egypt after a series of reforms, including the currency devaluation that saw the pound lose more than 40% of its value against the dollar since March 2022. The U.S. currency traded Tuesday at more than 27.5 pounds for $1.
“Flexibility in the exchange rate will bring several benefits. It would help Egypt’s domestic economy adjust more smoothly to external shocks. It would support the ability of Egyptian businesses to sell their goods and services abroad, and it would encourage greater investment," Ivanna Vladkova Hollar, chief of IMF’s mission for Egypt, told a news conference Tuesday.
Along with “permanent shift to a flexible exchange rate regime,” the reforms also included allowing a greater role for the private sector in the economy and hikes in fuel prices, according to an IMF report released Tuesday.
The government also pledged to slow investment in public projects to fight inflation and reduce consumption of foreign currency, according to a letter of intent Egypt sent to the IMF on Nov. 30.
El-Sissi’s government has been investing huge amounts of funds in infrastructure projects across the country, including a new capital, new cities and a network of new roads and railways.