Egypt’s annual inflation jumped significantly to 9.8% in June compared to 8.2% in May and 8.1% in April, raising consumer prices to 0.9%, the Central Agency for Public Mobilisation and Statistics (CAPMAS) reported.
The food and beverage sub-index jumped 12.7% year on year and 2.3% month on month. This month’s inflation level is the highest since 2011, when levels registered 10.4% in July.
Chairman of CAPMAS Abou Bakr El Guindy stated that the past month’s consumption and stockpiling of food items was exceptional, as Egyptians anticipated possibility of food shortages in light of the political turbulence in the country ahead of the month of Ramadan.
Financial experts however predict inflation rates to further increase, especially after the Central Bank of Egypt’s decision to keep the main overnight deposit, lending and discount rates at 9.75%, 10.75% and 10.25% early this month in light of the lack of strong economic growth.
Financial expert Alaa Mostafa, on the other hand, believes that the current interest rates set by the central bank are not representative of the inflation rate in Egypt.
“As we move further into the summer season, prices are very likely to go up, and thus inflation will increase much more,” he said.
Mostafa cited the consistent inflation increases over the past few months, adding: “very low foreign currency reserves, low tourism revenues and low exports, are all factors that significantly and directly affect the interest rates.”
Economic expert Sherif El-Khereiby warned that political instability may push the Egyptian pound to further depreciate in value, which would boost inflation rates.
“The Egyptian pound has lost 15% of its value since last year, and this has resulted in higher costs of imported goods, and has contributed to inflation as well,” he said.
Since the January 25th Revolution, Egypt has been struggling with its lack of foreign currency reserves. Net foreign reserves shrank by $1.1bn in June, reaching $14.922bn compared to $36bn on the eve of the revolution.
In addition, the tourism sector, which prior to the revolution had represented 11% of the country’s GDP, has been severely affected as well, resulting in low revenues.
Meanwhile, inflation has severely affected the buying and selling trends in Egypt causing a state of “paralysis”, with sales in the country’s food market decreasing 40%, in addition to 70% in the retail market.