Inflation rate in Egypt jumps to 8%

The annual general inflation rate in Egypt continued its upward trajectory in September, recording its highest levels in at least a year, as it jumped to eight per cent compared to September 2020, while the inflation rate rose on a monthly basis by 1.6 per cent in September compared to August, according to data from the Central Agency for Public Mobilisation and Statistics.

These numbers are consistent with the citizens’ general sense of the increase in prices, while the government did not take any steps to limit this rise and even made matters worse by announcing two days ago an increase in gasoline prices, which angered citizens.

The new school year

The education section in the annual inflation index recorded an increase of 29.7 per cent, while the food and beverages section recorded an increase of 13.1 per cent, the goods and services section witnessed an increase of 9.1 per cent, the transportation and communications section increased by three per cent, and the health care section recorded an increase of 2.4 per cent.

Experts believe that the surge in annual inflation in September is based on the rise in import prices against the backdrop of high energy prices globally on the one hand, and the recovery of domestic demand on the other hand, as we are witnessing a rise in demand linked to the start of the school year in this period of the year, which is evident in the significant rise in the prices of goods associated with the education department.

The impact of this rise in demand on prices is doubled when compared to the same period last year, considering the relatively weak demand at the time, with the intensification of the effects of the coronavirus outbreak on domestic demand. The effects of these rises were clear on citizens, as many families complained about the high prices and their inability to meet the needs of their families with the beginning of the new school year, calling on the government to intervene to control prices.

It is also expected that the current inflationary wave will push the Central Bank to keep interest rates as they are until the end of the year at least, with the exclusion of any possibility of reducing them in the foreseeable future, as interest policies are linked to an inverse relationship with inflation rates, so that interest plays a role in compensating the holders of savings for the purchasing value of their savings which are deteriorating due to inflation.

Rise of fuel prices

Experts expect inflation rates to continue to rise during the month of October, due to the increase in fuel prices, and the consequent rise in transport prices and some related services. Last Friday witnessed a rise in gasoline prices for the third time in one year, and the government attributed the reason for the rise to the increase in global oil prices, in addition to a “slight increase in foreign exchange rates.”

According to the new prices, gasoline 80 is sold at seven pounds per litre, gasoline 92 at 8.25 pounds per litre, and gasoline 95 at 9.25 pounds per litre, that is how prices will be until the end of the year. Two years ago, the government completely abolished fuel subsidies, and established an “automatic pricing mechanism,” which depends on the international prices of oil and the price of the dollar in the local market, which are influential and determine the cost of providing and selling petroleum products in the local market, in addition to other burdens and costs.

During the current year, the pricing committee fixed prices once, in January, and raised prices three times. In total, the prices of gasoline segments increased by disproportionate degrees, on an annual basis, as the price of gasoline 80 jumped by 12 per cent annually, and gasoline 92 by 10 per cent, while gasoline 95, which is used for luxury cars, had the lowest rate of increase at 8.8 per cent. The government sought to reassure citizens that prices would not be affected by the increase in the price of fuel, but this is illogical, as it is expected that transportation prices and some related services will rise.