CAIRO (AP) – Egypt’s annual inflation rate reached a record high in July, as price hikes continue unabated in the cash-strapped North African country, official figures said yesterday.
Consumer prices rose 38.2 per cent from a year earlier, up from 36.8 per cent in June, according to data released by the state-run Central Agency for Mobilization and Statistics.
Average food and beverage prices, the main drivers of inflation, increased 68.2 per cent over the past 12 months, the agency’s data showed.
Egyptians, particularly working-class households, are struggling to keep up with the rising prices, which have soared since the war in Ukraine began last year.
Egypt is the world’s largest wheat importer, with most of its supplies traditionally coming from eastern Europe. But Russia pulled out of a wartime agreement in July that allowed Ukraine to ship its grain to the world.
Egypt and other Middle Eastern countries have diversified their sources of wheat, the main ingredient for flatbread that is a staple of diets, and don’t expect shortages. But the end of the grain deal has helped push up prices for global food commodities like wheat, vegetable oil and rice, also tied to trade restrictions on rice from India.
The main issue is weakening currencies in nations like Egypt, which means they have to pay more for imported food priced in US dollars. Since the beginning of the war in Ukraine in February 2022, the Egyptian pound has lost over 50 per cent of its value against the dollar.
The depreciation accelerated after Egypt’s government announced it had reached a USD3 billion bailout agreement with the International Monetary Fund in October. In exchange, the Egyptian government agreed to implement several economic reforms, including a shift to a flexible exchange rate.
In one good sign, the falling value of the currency makes Egyptian goods cheaper and more competitive internationally.
Over the past year, Egypt’s central bank has tried to target inflation by hiking its main interest rates. Last week, the bank’s most basic rate of lending, the overnight deposit rate, increased from 18.25 per cent to 19.75 per cent.