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Egypt inflation reaches 33%, the highest rate since 1986

August 11, 2017 at 9:53 am

National Bank of Egypt in Cario [Daniel Mayer/Wikipedia]

Data released by the Central Agency for Public Mobilization yesterday revealed that Egypt’s annual inflation rate jumped from 29.8 per cent in June to 33 per cent in July, coinciding with the acceleration of painful economic reforms.

This is the highest inflation rate in cities since July 1986, where it reached 35.1 per cent, according to Reuters’ statistics. It is also the second highest rate ever since the start of urban inflation data accumulation in 1958. On a monthly basis, urban consumer price inflation jumped from 0.8 per cent in June to 3.2 per cent in July.

The central bank of Egypt stated that the basic annual inflation rate jumped from 31.95 per cent in June to 35.26 per cent in July, constituting the highest rate since the bank started accumulating inflation data in 2005. The inflation does not include products such as fruits and vegetables because of the huge fluctuation in their prices.

Om Omar, a vegetable and fruit seller in Qalyoubia, told Reuters that “prices are expensive and people are not buying goods like before… we cannot have a decent life anymore… life became difficult”.

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Riham Al-Dessouqy, from Arqaam Capital, clarifies that “the increase in this month is caused by the augmentation of costs for companies after the rise in the prices of raw materials and the increase in fuel prices”.

This increase in inflation rates in Egyptian cities came after the government raised the prices of petroleum products at the end of June by 50 per cent in a second augmentation in only eight months. Electricity prices too were raised in July by about 40 per cent.

“Inflation in Egypt is now reaching its peak with a number of non-recurring factors that will gradually dissolve over the next six to nine months,” said a spokesperson for London-based economic research consultancy Capital Economics, adding, “We believe that it will start falling faster than expected”.

During the last few months the government has raised the prices of all subsidised goods and services, including fuel, electricity, water, medicine and transportation.

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Al-Dessouqy adds that “companies are unable to significantly raise their prices during the coming period, so the demand will not be affected anymore. I expect that the inflation rate will range between 32 per cent and 33 per cent in the next month”.

The results of a number of food companies that are enlisted in the Egyptian Stock Exchange revealed a decrease in corporate profits during the second quarter of this year, due to the jump in the country’s inflation rate, in addition to the rise in interest rates and the decline of consumers’ purchasing power.


However, companies raised sales and distribution costs in order to boost promotions, keep their market share and increase the sales. Actually, sales declined due to the low appetite and purchasing power of consumers that resulted from the rising prices of goods and commodities.

Prime Minister Sharif Ismail has been working on a series of economic reforms since the end of 2015 in an attempt to revive the economy and put it back on the growth track. The reforms included an increase in energy, medicine and water prices, as well as the liberalisation of the exchange rate, the adoption of new investment laws and the pre-approval of a bankruptcy law.

Egyptians, who are among the millions living below the poverty line, complain that they may not be able to afford food after the consecutive jumps in fuel, medicine and transportation prices, especially the metro used by millions of Egyptian citizens.

Despite the government’s efforts to ease the pain of its economic reforms through different measures, such as increasing the subsidies on ration cards, Egyptians are still complaining about the rising prices that are devouring their income and that do not help them meet their basic needs.