Egyptian inflation climbs to 11.5% on back of falling currency

Inflation in Egypt continued to increase in March, edging up 1.5 percentage points to 11.5 per cent as food costs rose because of a falling currency.

The price of food jumped 2.4 percentage points against the previous month despite the United Nations Food and Agriculture Organization’s food price index showing world food prices at a five-year low. The Egyptian Central Bank allowed the pound to devalue in January. This meant that the currency fell from 7.15 to 7.26 against the US dollar, pushing up the cost of imports.

“The pick-up in domestic food prices reflects the depreciation of the Egyptian pound and possibly shortages triggered by restrictions on access to foreign currency,” wrote William Jackson, the senior emerging markets economist at Capital Economics.

Housing and utilities costs rose by 2.8 per cent month-on-month as a recovering economy drives the real estate market upwards.

The real estate consultancy JLL said that house sales increased due to improving “economic and political sentiment”.

The consultancy said: “Apartment and villa sale prices increased during 2015 across all areas monitored, [because] many residential developments have few units left and have increased prices accordingly.”

Transport costs remain 20 per cent higher than the previous year after the end of fuel subsidies last July caused a permanent, one-time spike in the cost of gas.

Inflation is set to remain in the double digits until the third quarter of the year, at which point it is likely that the central bank will cut interest rates, analysts at Capital Economics predicted.

Per capita growth has been anaemic since before the 2011 revolution as population and price pressures eat into the living standards of Egyptians, 60 per cent of whom live on less than $4 per day.

abouyamourn@thenational.ae

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