By Adam Makary and Aidan Lewis
CAIRO (Reuters) -Egypt’s year-on-year headline inflation rose to a record 35.7% in June from 32.7% in May, official data showed on Monday, accelerating past the previous high reached in 2017 and reflecting acute economic strains since early last year.
Prices have soared as Egypt has struggled through a shortage of foreign currency and repeated devaluations since March 2022, increasing hardships for many Egyptians who have seen their living standards eroded in recent years.
“All we hear about is inflation,” said Wafaa Youssry, a 40-year-old Uber driver from Cairo, who said she no longer had enough money to send her children to private schools despite her husband moving to Kuwait for better pay. “It’s forced me to think creatively because there aren’t enough jobs here that pay decent salaries.”
Analysts had forecast the record reading for annual urban consumer price inflation in June, citing an unfavourable base effect and an increase in consumer demand over the annual Eid al-Adha holiday.
Core inflation, which strips out fuel and some volatile food items, also hit a record of 41%, up from 40.3% in May, the central bank said.
The continuing surge in inflation may increase pressure on Egypt’s central bank to raise interest rates at its next scheduled meeting on Aug. 3. The bank has held rates steady in its last two meetings, after raising them by a total of 1,000 basis points since March 2022.
POWER PRICES
Increases in electricity tariffs, which the government has deferred in an effort to soften the impact of inflation, could reinforce price pressures through the summer.
“Assuming we see power tariffs being hiked in July, annual inflation could remain high for a longer duration,” said Allen Sandeep of Naeem Brokerage.
“Without the power tariff hike, we might see some cooling off in July because of the favourable base year.”
Egypt, the Arab world’s most populous nation, has devalued its currency by about half since March 2022 after the fallout from Russia’s invasion of Ukraine exposed its economic vulnerabilities and prompted it to seek assistance from the International Monetary Fund under a $3 billion loan programme.
The first review of the IMF programme has been delayed amid uncertainty over Egypt’s pledge to move to a flexible exchange rate and over a government programme to boost the private sector, including by selling stakes in state companies.
Prime Minister Mostafa Madbouly is due to give an update on the programme on Tuesday.
The previous headline inflation record of 32.95% was reached in July 2017, eight months after Egypt devalued its currency by half as part of a previous IMF package.
(Additional reporting by Tala Ramadan and Nadine Awadalla; Editing by Jamie Freed, William Maclean)
