Egyptian inflation accelerated to another record high, with a new surge in food costs heaping more pressures on a country struggling with a debilitating foreign-currency crunch.
Consumer prices in urban parts of the country rose an annual 36.5% in July, from 35.7% the previous month, according to figures released Thursday by the state-run CAPMAS statistics agency. On a monthly basis, inflation was 1.9%, compared with 2.1% in June.
Read More: Egypt Currency Squeeze Sinks Bank Foreign Buffers to New Low
The surge takes the headline figure yet further beyond the level reached in the aftermath of Egypt’s 2016 currency crisis. It came in spite of a favorable base effect and was driven by a 68.4% increase in food and beverage costs, the largest single component of the inflation basket.
The third month of acceleration helps explain a surprise decision by the North African nation’s central bank last week to hike interest rates by 100 basis points in a bid to curb inflation.
The regulator sees consumer price increases peaking in the second half of 2023 before “beginning a disinflation path” toward a level of 5%-7% by the end of next year.
Devaluation Rounds
Egyptian inflation is bearing the brunt of three devaluations of the pound since early 2022 that helped secure a $3 billion International Monetary Fund loan.
The rate hike was a surprise because most analysts expected authorities would hold fire until they’d built up extensive foreign-currency buffers, including through a program of state-asset sales, and would then conduct another currency adjustment.
The pound has remained stable at 30.9 per dollar in banks for months and is trading around 38 on the black market. President Abdel-Fattah El-Sisi warned in June about the impact of currency devaluations on rising prices, saying the nation of over 100 million won’t be able to tolerate much more weakening of the pound.
“Relative stability in the parallel rate over the past few weeks is likely to have helped stabilize prices elsewhere in the CPI basket, but price pressures remain pronounced in certain categories as tourism increases,” Goldman Sachs Group Inc. economists including Farouk Soussa said in a report before the data release.