The annual urban inflation in Egypt has climbed to 13.1% year on year in April from 10.5 in 2021 leading to a surge in the price of food in the North African country – the highest it’s been in three years. The data from Central Agency for Public Mobilization and Statistics shows that the food inflation had reached 26% and was at a monthly hike of 7.6%.
Conflict in Ukraine has created supply disruptions and has caused a scarcity in Egypt. Egypt s the world’s biggest buyer of wheat and imports 80% of its requirements from the Black Sea region.
“Inflation will continue to rise over the rest of this year and prompt the central bank (CBE) to hike interest rates further – we have pencilled in 350bp of hikes by the end of this year, to 12.75%, which is more than the consensus expects,” reports Capital Economics.
The situation is also the same across other segments in April. Higher energy costs, due to the government raising fuel prices, put more pressure on the transport sector. The devaluation of the pound by 14% in March also had an effect on local prices. The surging inflation is likely to add pressure on the Egyptian central bank to raise interest rates at its next meeting.
“This was the fastest pace of annual price growth since May 2019 and it exceeded both our forecast (12%) and Reuters consensus (11.8%) and makes more rapid tightening by the Central Bank of Egypt more likely at its rate-setting meeting next week,” said Emirates NBD which operated in the MENA region wrote. The bank now expects 300bps hike at the May 19 meeting, up from the previous expectation of 200bps.
Capital Economics said the CBE will continue to hike interest rates “and we have pencilled in a further 350bp of hikes, taking the overnight deposit rate to 12.75%, by the end of this year.”
In March, the inflation rate jumped to more than 10% compared to 8.8% in February.