Rising inflation rates are being felt across Egypt with continued hikes in the prices of commodities exacerbated by two devaluations of the pound since March this year.
The annual urban inflation rate recorded a five-year high of 18.7 per cent in November, up from 16.2 per cent in October, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).
The increase was driven by a 29.9 per cent surge in food and beverage costs.
CAPMAS provided detailed rates of increases in the prices of staple commodities, such as grains and bread (4.8 per cent), meat and poultry (6.8 per cent), fish and seafood (3.7 per cent), dairy, cheese, and eggs (5.5 per cent), oils and fats (1.4 per cent), and vegetables (7.8 per cent).
Financial analyst Mustafa Badra said rising inflation rates had been expected over the past few months due to the devaluation of the pound and the jump in the dollar exchange rate from LE19.7 to LE24.5 after the devaluation on 27 October.
According to Badra, the scarcity of dollars in the banks since then has affected production in many sectors and contributed to the rise in prices as manufacturers raise the prices of their products to make up for low production.
He said that inflation would continue to rise through mid-2023 as the prices of petroleum products and electricity are expected to rise in the earlier months and the middle of the year. Headline inflation rates will reach their peak in the second quarter of 2023 to hover around 25 per cent, he said.
He expects headline inflation to range between 13 and 15 per cent in 2023 and to drop to nine per cent in 2024.
The hike in inflation raises the chances that the Central Bank of Egypt (CBE) will increase interest rates at its next meeting on 22 December. On the day of the second devaluation of the pound this year, the CBE held an unscheduled meeting and decided to increase rates by two per cent.
Banking expert Sahar Al-Damati expects interest rates to remain at their current levels as any increase would push up the rates the government pays on its borrowings, and this would add to already ballooning domestic debt.
Expert Mohamed Al-Beih foresees a two per cent rise in interest rates, saying it is highly likely the CBE will take this step for a limited period.
In order to lower inflation, there will need to be an increase in production and exports and a decrease in imports to conserve dollars, Al-Beih said.
*A version of this article appears in print in the 15 December, 2022 edition of Al-Ahram Weekly