Egyptian inflation accelerated after a monthlong respite, as a round of price increases by authorities fans pressures already building following three currency devaluations.
Consumer prices in urban parts of Egypt climbed an annual 32.7% in May from 30.6% the previous month, according to a statement Saturday from the state-run statistics agency CAPMAS. Food and beverage costs, the largest single component of the inflation basket, rose 60%.
The inflation rate has tripled over the past year after Egypt devalued the pound and eventually secured $3 billion from the International Monetary Fund. Though global food costs have been declining after a spike following Russia’s invasion of Ukraine, Egypt recently raised the prices of some subsidized commodities such as rice and sugar and sharply raised domestic diesel prices for only the second time since mid-2019.
Higher prices for subsidized goods are filtering through an economy that’s also at risk of further currency depreciation, a threat because it would make imports even more costly. Headline inflation may climb to almost 37% in the third quarter of 2023, according to Farouk Soussa, an economist at Goldman Sachs Group Inc.
The central bank targets inflation of 7%, plus or minus 2 percentage points, by the fourth quarter of next year. The government has said tackling inflation is a top priority.
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The Monetary Policy Committee kept its key interest rate unchanged at 18.25% last month as a slight slowdown in inflation for April eased the urgency of adding to the 10 percentage points of cumulative increases delivered since March 2022.
Governor Hassan Abdalla recently signaled higher rates could do little to contain inflation that he described as stoked mainly by supply issues.
--With assistance from Abdel Latif Wahba.
Author: Mirette Magdy and Tarek El-Tablawy
