The annual inflation rate of Egypt soared to a record high in June, as the country grapples with rising prices and a depreciating currency, according to the Egyptian statistics bureau. The annual inflation rate reached 36.8% last month, surpassing May’s figure of 33.7%. The state-run Central Agency for Mobilization and Statistics released data highlighting price increases across various sectors, including food items, medical services, housing, and furniture. The recent Russia-Ukraine war contributed to a global wave of inflation, impacting Egypt’s economy.
Food and beverage prices, the main drivers of inflation, witnessed a significant surge of 64.9% in June compared to the same period last year. Grains, meat, poultry, fish, and fruit experienced substantial price spikes, exacerbating the inflationary pressures. The inflation rate in June more than doubled compared to the previous year when it stood at 14.7%.
The global wave of inflation affects Egypt’s economy
Egypt, with a population of over 105 million, is the world’s largest wheat importer, with a significant portion traditionally sourced from Ukraine and Russia. Even before the war, the country faced price hikes due to an ambitious economic reform program initiated in 2016. The program aimed to address longstanding distortions in the economy and included austerity measures such as reducing subsidies for fuel, water, and electricity. In exchange, the government received multi-billion-dollar bailout loans from the International Monetary Fund, with the most recent loan of $3 billion granted in December.
To combat annual inflation, the Central Bank of Egypt has implemented measures such as raising its main interest rate and devaluing the Egyptian pound. However, these actions have triggered an economic shock, adversely affecting millions of individuals who have seen their savings dwindle as the cost of living continues to surge. Official figures indicate that around 30% of Egyptians live in poverty.
Since the outbreak of the war in Europe, the Egyptian pound has experienced a depreciation of over 50% against the US dollar. As of Monday, the exchange rate stood at over 30.80 pounds per $1. The combination of inflation and currency devaluation poses significant challenges for the Egyptian economy and its population, highlighting the urgent need for measures to mitigate the impact on people’s livelihoods and overall economic stability.