Confusing jumps witnessed in annual consumer price inflation in Egypt

Annual consumer price inflation in Egyptian cities jumped to 35.7 percent in February from 29.8 percent in January, driven mainly by higher prices for food and beverages.

According to Reuters, the increase is a result of the devaluation of the currency last week, as the Central Bank, on Wednesday, allowed the Egyptian pound to fall to about 50 pounds to the dollar from 30.85 pounds, a level at which it had been stable over the past twelve months.

A poll of analysts expected inflation to slow in February to 25.1 percent on average, according to Reuters.

Data from the Central Agency for Public Mobilization and Statistics showed that on a monthly basis, prices rose 11.4 percent in February, compared to only 1.6 percent in January. Food prices jumped 15.9 percent, compared to 1.4 percent in January.

“The sharp increase in the annual reading was driven by higher monthly inflation for both food (food and beverages) and non-food items, despite the positive base year contribution of -5.5 percent,” said Allen Sandeep of Al Naeem Financial Brokerage.

The increase in consumer prices comes after the Egyptian government floated the Egyptian pound, which pushed prices to rise linked to the change in the pound’s exchange rate.

Egyptian President Abdel Fattah El-Sisi said on Saturday that his opposition months ago to the issue of “floating” the local currency had dimensions related to national security, explaining that after the arrival of financial flows from the agreement to develop the Ras El-Hekma region and from the International Monetary Fund, it became possible to take this measure.

It is noteworthy that the “Standard & Poor’s Global” credit rating agency announced, on Friday, that it is “optimistic” about the influx of financial support that Egypt has received in the past two weeks.

On Thursday, Moody’s confirmed its CAA1 rating but changed its future outlook for Egypt to “positive,” based on the great official and bilateral support.

Remittances from Egyptians working abroad, the country’s largest single source of foreign currency, slowed sharply last year, amid expectations of a decline in the pound.

Remittances plunged $9.85 billion in the fiscal year that ended June 30, then fell another $1.93 billion in the July-September period, according to central bank figures.

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