Egypt’s statistics bureau has said inflation in the country reached 25.8% in January 2023, a 5-year high as the North African nation continues to face challenges with rising prices and a weakened currency.
The Central Agency for Mobilization and Statistics of Egypt (CAPMAS) released the yearly inflation rate showing an increase of 26.5% from January 2022 to 21.9% in December 2022. This is a significant jump compared to January 2022, when the inflation rate was only 8%.
The main factor contributing to the inflation rise was a 48% increase in the cost of food and beverages which is the largest component of the basket used to measure inflation.
According to the statistics office, the prices of commodities in Egypt remained on the rise in January 2023. There was a 6.6% average increase in the cost of bread and cereals, and a substantial 20.6% hike in the price of meat and poultry.
Egypt’s economy has suffered greatly in recent years due to a combination of factors such as government austerity measures, the COVID-19 pandemic, and the aftermath of the war in Ukraine, officials have said.
As the largest wheat importer in the world, Egypt mainly relies on imports from Eastern Europe for its supply.
The sustained inflation hike has had the greatest impact on low-income households in Egypt who primarily rely on government subsidies for necessities like bread. Unfortunately, official statistics indicate that nearly 30% of the population in Egypt lives in poverty.
In an effort to alleviate the ongoing economic crisis, the Egyptian government and the International Monetary Fund (IMF) reached a agreement in December 2022 for a $3 billion bailout package. The IMF deal was contingent on Egypt implementing various economic reforms, such as implementing a flexible exchange rate, in addition to the possibility of additional funding of up to $14 billion.
Following Egypt’s decision to adopt a flexible exchange rate, the value of the Egyptian Pound has continued to drop. Since 2022, the currency has lost approximately 50% of its value when compared to the US dollar.
The country is also facing a scarcity of foreign currency leading many banks to impose restrictions on foreign money withdrawals. In response, the government has announced the postponement of several future projects that would entail a significant amount of foreign spending.
Measures to sell shares in government-owned companies have also been recently announced.