Egypt urban consumer prices rise fastest in eight years

epa05628184 People buy vegetables at a market in Dokki, Giza, Egypt, 12 November 2016. The International Monetary Fund (IMF) approved on 11 November a three-year, 12 billion US dollars loan for Egypt to help the country recover from its deep economic crisis, the fund said in a statement. The IMF board said it will release 2.75 billion US dollars to Egypt immediately, while further disbursements will depend on the country's economic performance and implementation of reforms. The prices of all basic consumer goods have increased prior to the loan approval. EPA/KHALED ELFIQI

 

Bloomberg

Egypt’s urban consumer prices rose the fastest in eight years in November, driven by a 21.5 percent increase in food costs after the government floated the currency and raised fuel prices.
Annual urban inflation accelerated to 19.4 percent, while monthly inflation climbed to 4.8 percent, according to the state-run statistics agency CAPMAS. The annual rate was the highest since November 2008, according to data compiled by Bloomberg. In October, before the Nov. 3 currency and fuel measures went into effect, annual inflation was 13.6 percent. The rise was expected, given the weaker pound and increasing transportation costs, said Reham ElDesoki, senior economist with Dubai-based Arqaam Capital. “This is not the end of it; inflation will go even higher in the coming few months.”
Economists had projected that annual inflation would climb to about 20 percent after the central bank freed the exchange rate to finalize a $12 billion International Monetary Fund loan it saw as critical to boosting investor confidence in the economy. The flotation, along with a rise of almost 50 percent in fuel costs and a new value-added tax, were expected to further drive up prices in a nation where at least half of the population of 92 million live below or near the poverty line.
Officials have promised to take steps to ease the impact of price increases on the country’s neediest, while emphasizing that structural reforms, cutting costs and revamping a bloated subsidy system were key to Egypt’s economic revival.
The pound now trades around 17.9 per dollar, 50 percent below its value before the central bank removed all restrictions on the exchange rate. The regulator also said it will cease defending the currency, a policy that cost Egypt billions of dollars since 2011.
Central Bank Governor Tarek Amer said the market was adapting to the new currency regime. The volatility in the exchange rate “is very good, it’s very healthy,” he said in an interview with the Enterprise newsletter on Thursday. Amer also said he expected investment inflows to Egypt to pick up and “automatically have a very positive impact on exchange levels” and inflation.

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