Annual inflation rate in Egypt reaches new high as currency surges

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Egypt’s annual inflation surged to a new high in January as the country continues to battle ongoing price hikes and a depreciating currency, the Egyptian statistics bureau said on Thursday.

The state-run Central Agency for Mobilization and Statistics published figures showing that the annual inflation stood at 26.5% last month, up from 21.9% in December. In January 2022, the same figure stood at just 8%, before spiking after the outbreak of Russia’s war in Ukraine the following month, shaking the world economy.

During January, the prices of basic commodities in Egypt rose steadily. The cost of bread and cereal increased on average by 6.6% while the price of meat and poultry climbed by 20.6%, the bureau said.

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The Egyptian economy has been hit hard by years of government austerity, 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.

Greatly affected by the enduring hikes are Egypt’s lower-income households, most of whom are reliant on government subsidies for basic goods such as bread. Nearly 30% of Egyptians live in poverty, according to official figures.

A crowded street in Cairo, Egypt, is pictured on April 14, 2020. Egypt’s annual inflation rate reached a new high in January at 26.5%.  (AP Photo/Nariman El-Mofty, File)

In December, Egyptian authorities and the International Monetary Fund agreed on a $3 billion bail-out package to ease the crisis. The IMF deal was struck in exchange for Egypt implementing a number of economic reforms, including a shift to a flexible exchange rate. The deal also allows for a further $14 billion in possible financing for Egypt.

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The value of the Egyptian pound has continued to slide following its decision to shift to a flexible exchange rate. The currency has lost around 50% of its value against the dollar since the start of 2022.

On Wednesday, the Egyptian government unveiled plans to sell stakes in dozens of state-controlled companies, including banks and energy firms. Economists have long criticized the economic dominance of the Egyptian government and the army, labelling it a barrier to private sector growth.

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Egypt is also facing a foreign currency shortage. Many banks have placed limits on foreign cash withdrawals, while Egypt’s government announced it is postponing numerous future projects that would require significant foreign expenditure.