Egypt’s annual inflation reached 31.7 percent in February, the highest rate in decades, stoked by the annual food inflation rate which hit 41.7 percent last month.
The rising inflation rate follows the government’s decision to devalue the Egyptian pound and reduce fuel subsidies as part of an austerity program implemented alongside the three-year US$12 billion International Monetary Fund loan deal signed last November.
The monthly national inflation rate decreased from 4.3 percent in January to 2.7 percent in February, but food prices increased by 4.1 percent during this time according to a statement issued by the Central Agency for Public Mobilization and Statistics (CAPMAS) on Thursday.
Prices rose by 5.5 percent for meat and poultry, 4.5 percent for vegetables, 6.3 percent for dairy, 8.3 percent fish and seafood and 6.6 percent for fruits. The price of ready meals rose by 1.4 percent, furniture by 1.9 percent and healthcare by 1.9 percent.
London-based economic research company Capital Economics published a research note on Thursday claiming that the inflationary wave has already peaked, anticipating that it will ease by the second half of 2017. Capital Economics also noted that inflation was driven by a diverse range of the categories which comprise the Consumer Price Index (CPI) basket.
Although the note points to the currency devaluation as the main cause for the ballooning inflation, it also mentions its positive effect on the balance of payments which achieved a surplus of $7 billion in the second half of 2016 compared to a deficit of $3.4 billion in the same period of last year, according to central bank data.
The inflation rate has been accelerating since last November when the exchange rate was liberalized, halving the value of the Egyptian pound compared with the American dollar. The government also simultaneously took the second step in the energy liberalization program, raising fuel prices by up to 47 percent.
Egyptians have seen their purchasing power drop significantly with the rising price hikes, as salaries have yet to catch up. Following the devaluation, Heba al-Laithy, professor of statistics at the University of Cairo and a CAPMAS consultant, calculated that the poverty rate could increase by up to 35 percent as annual inflation surpasses 15 percent, but with inflation rate at double that estimate, the rate of poverty could exceed this projection.
Finance minister, Amr al-Garhy said in February that he expects inflation rate to peak by the end of March at most.