Egypt’s annual urban consumer price inflation jumped for the second month since the Egyptian pound was freely floated last year to reach 23.3 percent last month from 19.4 percent in November last year, the official CAPMAS statistics agency said yesterday.
Egypt abandoned its currency peg of 8.8 to the US dollar on Nov. 3 last year, in a dramatic move that has since seen the currency depreciate by about half. It accompanied the move with a 300 basis point interest rate hike to fight inflationary pressures.
Despite the hike, inflation is rising sharply and is expected to climb further this year as the government pushes on with economic reforms, including fuel subsidy cuts and the implementation of a value-added tax (VAT), that helped it secure a US$12 billion IMF loan program.
In cities and towns, food and beverage inflation touched 28.3 percent last month. Healthcare inflation stood at 32.9 percent while transportation was 23.2 percent.
Egyptian President Abdel-Fattah al-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public.
Al-Sisi last month predicted that the Egyptian pound would strengthen in the coming months and promised to ensure basics were available and affordable.
The government has expanded its social security network and some 70 million Egyptians have access to state subsidized bread.
Egypt’s non-oil business activity last month shrank for the 15th consecutive month last month as inflation caused purchase costs to rise at a near-record pace.
Economists said rising inflation would erode spending power, hit economic growth and prompt further hikes to interest rates, which are already up to 15.75 percent.
Egypt’s central bank has held interest rates steady at two monetary policy meetings following its flotation and some economists expect further rate hikes this year.
The monetary policy committee is due to meet again on Feb. 16.