Egypt’s Urban Inflation Spikes Amid the Ukrainian Crisis

The Central Agency for Public Mobilisation and Statistics (CAPMAS) announced on Sunday that Egypt’s annual urban consumer price inflation has accelerated in March 2022 to 10.5 percent. This is the highest inflation rate recorded in approximately three years, according to CAPMAS. 

The inflationary wave brought on by the onset of the COVID-19 pandemic, and the Ukrainian crisis has triggered a flurry of price increases for basic commodities. These basic commodities include vegetables, unsubsidised bread, eggs, poultry, and cooking oil.

Price increases were heavily impacted by commodity shortages following Russia’s invasion of Ukraine, sending inflation rates above the Central Bank of Egypt’s 5-9 percent target and its 9.25 percent overnight lending rate

Last month, the Egyptian government announced a ban on the export of wheat, fava beans, lentils, pasta, and all kinds of flour for the next three months in a bid to shore existing supplies, and address growing concerns about food security.    

According to Hala El-Said, Minister of Planning and Economic Development, “the government plans to contain the inflationary wave by lowering its planned increase in public investment allocations to 15.2 percent, down from the 16.2 percent hoped for prior to the Russian-Ukrainian conflict”.

However, many analysts still expect the inflation rate to increase continuously in the months to come. The Central Bank of Egypt has confirmed that the core inflation rate, which does not account for food, has jumped to 10.1 percent in March from 7.2 percent in February, its highest since June 2018.  

Meanwhile, Senior Economist at CI Capital, Sara Saada, predicts that the government will increase fuel prices this month. “We expect monthly inflation to peak in April to record annual inflation between 12.5-13 percent, which reflects higher petroleum products prices,” she said.

The Central Bank of Egypt’s Monetary Policy Committee has stressed that “achieving low and stable inflation rates in the medium term is a prerequisite, pointing out that it will closely follow all economic developments and will not hesitate to use all its monetary tools to achieve the goal of price stability in the medium range.”