Egyptian inflation unexpectedly accelerated in February, a trend that may continue after a much-anticipated flotation of the pound aimed at turning around the troubled economy. Consumer prices in urban parts of the North African country rose by an annual 35.7% last month compared with 29.8% in January, the state statistics agency CAPMAS said Sunday. Prices were up 11.4% month on month — a record, according to data compiled by Bloomberg News stretching back to 2007.
Food and beverage prices, the largest single component of the inflation basket, climbed by 50.9% annually and 16.7% on a monthly basis. Annual core inflation, the gauge used by the central bank that strips out volatile items, accelerated to 35.1% in February versus 29% the previous month.
“Unexpectedly large spikes” in food, health, education and recreation prices fueled the increase, according to Allen Sandeep, director of research at Naeem Holding in Cairo. A record interest rate hike last week appears to have been a “front-loaded move to tackle inflation,” he said.
Egyptian consumer price growth had been gradually slowing since hitting record highs last summer amid the country’s worst economic crisis in decades. Now the focus will be on the impact of the central bank’s March 6 decision to let the pound tumble more than 38%, a move that helped seal a new $8 billion deal with the International Monetary Fund.
President Abdel-Fattah El-Sisi said he had held off on the latest currency move as it impacted national security and “because we couldn’t do this unless we had a considerable sum of money with which we could organize this market.” The president also said the challenges Egyptians had endured over the past years were the result of efforts to build the nation. “All our efforts and all our resources were in this country,” El-Sisi said at an event on Saturday, in his first comments on the currency flotation.
While the IMF had long called on Egypt to allow more currency flexibility, authorities were wary of the social impact of fueling another surge in costs. They finally took the step after securing a landmark $35 billion investment deal with the United Arab Emirates in late February.
The central bank said in its
