Egypt’s inflation rate saw a remarkable upswing in February, showcasing a notable acceleration that surpassed expectations even before the highly anticipated flotation of the Egyptian pound.
According to the Central Agency for Public Mobilization and Statistics (CAPMAS), Egypt experienced a record level of annual headline inflation in February, reaching 219.4 points. This indicates an annual inflation rate of 35.7 percent, compared to 31.2 percent in January.
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CAPMAS identified several factors contributing to this acceleration. The prices of meat and poultry increased by 25 percent, grains and bread by 14.2 percent, fish and seafood by 11.5 percent, dairy products, honey, and eggs by 12.8 percent, oils and fats by 14.1 percent, fruits by 7.3 percent, vegetables by 9.2 percent, and sugar and sweets by 6.9 percent.
Additionally, the prices of tea, coffee, and cocoa rose by 11.3 percent, tobacco by 8.5 percent, ready-made clothes by 4.4 percent, footwear by 3.2 percent, water and various housing services by 10.7 percent, furniture, furnishings, carpets, and other floor coverings by 8.6 percent, household appliances by 7.4 percent, and medical products, appliances, and equipment by 17.3 percent, according to CAPMAS’s data.
Furthermore, Egypt’s monthly inflation rate significantly accelerated in February, reaching 11 percent, up from 1.7 percent in January.
Unprecedented interest rate hike
The double-digit inflation in Egypt has persisted for nearly two years due to global commodity price increases and disruptions in the global supply chain. To combat this acceleration, the Central Bank of Egypt tightened its monetary policy by raising key interest rates.
Since March 2022, the Central Bank of Egypt has increased key interest rates by a total of 19 percent (1900 basis points), with an additional 8 percent increase occurring in February and March of this year. In an unscheduled meeting this month, the Central Bank raised key interest rates by an unprecedented 6 percent, allowing the local currency rate to be determined by market forces.
IMF boosts financial assistance
The International Monetary Fund (IMF) announced an expansion of financial assistance to Egypt under the Extended Fund Facility (EFF) program. The finance provided to Egypt has increased from $3 billion to $8 billion, and the completion of the first and second reviews under the program is expected in the coming weeks.
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