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Egyptian Inflation Slightly Eases Even After Currency Plunge
(Bloomberg) -- Egyptian inflation slowed in March despite a dramatic currency flotation aimed at turning around the battered economy that some analysts saw as likely to fuel another surge in costs.
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Consumer prices in urban parts of the North African country grew an annual 33.3% last month compared with 35.7% in February, state statistics agency CAPMAS said Monday. Monthly inflation was 1% — the lowest rate since October, according to data compiled by Bloomberg.
Food and beverage prices, the largest single component of the inflation basket, increased an annual 45% versus 50.9% in February. Their monthly growth slowed to 0.7% from 16.7%.
Core inflation slowed to 33.7% on an annual basis compared to 35.1% the previous month, according to the central bank.
Egyptian authorities on March 6 took the long-awaited step of loosening the reins on the currency and letting it tumble more than 38% against the dollar. It helped seal a new $8 billion deal with the International Monetary Fund that was swiftly followed by fresh financing pledges from the World Bank and European Union.
There’d been debate on how much the pound’s fall would affect consumer costs, with many goods having already been priced more in line with the currency’s much weaker value on the local black market. The devaluation effectively closed that gap, hobbling the parallel trade.
The IMF had long called on Egypt to allow greater currency flexibility, but authorities had been wary of the social impact of another round of potential prices hikes. They finally took action after a landmark $35 billion investment deal with the United Arab Emirates in February helped build up Egypt’s foreign-reserves buffers.
Four devaluations since early 2022 have piled pressure on the Egypt’s 105 million-plus population, forcing many households to cut consumption on food, clothing and other items. A March 22 hike in fuel prices will also add to costs.
Read More: Egypt’s $50 Billion Rescue Betrays Depth of Its Economic Crisis
Authorities have enacted wage hikes, boosted interest rates to a historic high and pledged to carefully monitor prices in an attempt to soften the blow to consumers.
Prime Minister Mostafa Madbouly said March 18 he expected prices to decline as more foreign currency becomes available, facilitating imports.
(Updates with core inflation)
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