Egypt's annual headline inflation hit a new record high 31.7 percent in February, up from 29.6 percent in January, state statistics body CAPMAS announced Thursday.

 

In its statement, CAPMAS attributed the spike to price hikes in basic goods and services, which have surged in recent months.

The cost of foodstuffs and beverages rose by 40.5 percent year-on-year. However, the monthly rate of increase slowed, registering only a 2.6 percent climb in February, compared to 4.1 percent in January.

Poultry and meat prices increased by 5.5 percent in February, vegetables by 4.5 percent and fruits by 6.6 percent. Dairy products and eggs as well as seafood products witnessed same trend, with 6.3 percent and 8.3 percent increases respectively.

The news comes only two days after President Abdel Fattah El-Sisi called on the government to limit the effect of inflation on citizens by bolstering the abilities of governmental watchdogs and the consumer protection agency to prevent the development of monopolies on basic goods.

Commenting on the CAPMAS announcement, Jason Tuvey, Middle-East economist at London-based Capital Economics, said on Thursday that the "fresh 30-year high" inflation is likely to start falling in the second half of the year.

Tuvey added in the Capital Economics note that the newly announced inflation, combined with signs that the country’s balance of payments position is improving, indicates that it is unlikely the CBE would raise interest rates later this month.

"The sharp rise in inflation over the past few months can largely be attributed to the effects of a weaker pound. Since it was floated at the start of November, the currency is down by 50% against the dollar. This has pushed up the cost of imports and firms have been quick to pass the hit on to consumers," Tuvey said.

In February, the Central Bank of Egypt (CBE) announced that the country's core inflation, which does not include volatile items such as fruits and vegetables, soared to a record 30.86 percent in January from 25.86 percent the previous month.

Shortly after the CBE's announcement, the country's Finance Minister Amr El-Garhy said that inflation is expected to ease in April after peaking in the first quarter of 2016/17.

In January, the IMF’s Mission Chief in Egypt Chris Jarvis said the IMF also expects Egypt’s headline inflation to “come down during the second quarter of this calendar year.”

The core consumer price index the CBE uses to measure price levels -– after excluding volatile commodities -– started to hit double-digits in May 2016, when it recorded a seven-year-high rate of 12.2 percent.

The CBE floated the Egyptian currency and raised key interest rates last November as part of a package of reforms aimed at reviving the country's flagging economy.

In January, El-Garhy announced Egypt’s budget deficit registered 5.1 percent of GDP in the first half of this fiscal year, down from 6.2 percent in the first half of last year. 

El-Garhy said the government hopes to reach a budget deficit of 10.1 percent by the end of FY 2016/17, down from 12.2 percent in 2015/16.

In July 2014, Egypt announced a fiscal reform programme in an attempt to curb a growing deficit. Reforms included cutting subsidies and introducing new taxes, including a value added tax, implemented in 2016.

The reform programme was endorsed by the International Monetary Fund, which later approved a three-year $12 billion loan, of which the CBE has received $2.75 billion so far.

Egypt's economy has been struggling since the 2011 uprising, with a sharp drop in tourism and foreign investment, two main sources of hard currency for the import-dependent country

Source: Ahram online