Despite the slogans that were chanted during January 25 Revolution in 2011 calling for ” bread, freedom and social justice”, however, Egypt is still living in what was called by Reuter’s Fortune as “The Economic Winter”.
Egypt is facing its harshest economic crisis in history. For the third straight month in June, Egypt’s urban consumer inflation has jumped as consumer demand increased during Ramadan, according to official data.
In fact, food demand normally rises during the Muslim holy month of Ramadan because of heavy consumption following the dawn-to-dusk fasting period. Ramadan this year began on June 6 and ended on July 5.
The statistics agency said that urban consumer inflation accelerated to 14% in June from 12.3% in May.
In addition, the central bank said that the Core inflation, which excludes items such as fruit and vegetables as their prices fluctuate widely, also rose to 12.37% year-on-year in June, up from 12.23% in May.
Egypt, which is an import-dependent country having 90 million population, has been under economic pressure since a 2011 uprising and the military coup in 2013 that led to more deteriorations. Egypt’s most important hard currency resources drove away tourists and foreign investors, straining its foreign reserves which halved to $17.5 billion in June.
The central bank plans to raise reserves to $25 billion by year-end.
In March, the central bank devalued the pound by about 13% and then hiked interest rates a few days later by 150 basis points at its MPC meeting on March 17 to curb inflationary pressures. However, It hiked rates again at its meeting on June 16 by 100 basis points as inflationary pressures persisted.
The Fortune reported that economists say the pound is still overvalued and expect another devaluation in 2016/17, a move that could further stoke inflation.
Abdel Fattah al-Sisi is under increasing pressure to revive the economy and keep prices under control to avoid any backlash from the public whose protest demands in the 2011 revolution included “bread, freedom and social justice,” said the Fortune.
Late last year, the government said it would control the prices of 10 essential commodities to help restrain inflation. Price movement subsequently eased but surged back again after the March devaluation.