CAIRO (AP) — Egypt’s annual inflation rate reached a record high in July, as price hikes continue unabated in the cash-strapped North African country, official figures said Thursday.
Consumer prices rose 38.2% from a year earlier, up from 36.8% in June, according to data released by the state-run Central Agency for Mobilization and Statistics.
Average food and beverage prices, the main drivers of inflation, increased 68.2% over the past 12 months, the agency’s data showed.
Egyptians, particularly working-class households, are struggling to keep up with the rising prices, which have soared since Russia invaded Ukraine last year.
Egypt is the world’s largest wheat importer, with most of its supplies traditionally coming from eastern Europe. But Russia pulled out of a wartime agreement in July that allowed Ukraine to ship its grain to the world.
Egypt and other Middle Eastern countries have diversified their sources of wheat, the main ingredient for flatbread that is a staple of diets, and don’t expect shortages. But the end of the grain deal has helped push up prices for global food commodities like wheat, vegetable oil and rice, also tied to trade restrictions on rice from India.
The main issue is weakening currencies in nations like Egypt, which means they have to pay more for imported food priced in U.S. dollars. Since the invasion of Ukraine in February 2022, the Egyptian pound has lost over 50% of its value against the dollar.
The depreciation accelerated after Egypt’s government announced it had reached a $3 billion bailout agreement with the International Monetary Fund in October. In exchange, the Egyptian government agreed to implement several economic reforms, including a shift to a flexible exchange rate.
In one good sign, the falling value of the currency makes Egyptian goods cheaper and more competitive internationally.
Over the past year, Egypt’s central bank has tried to target inflation by hiking its main interest rates. Last week, the bank’s most basic rate of lending, the overnight deposit rate, increased from 18.25% to 19.75%.
Even before the war, rising prices were common in Egypt. One of the drivers was an ambitious reform program, launched in 2016, that aimed to reverse longstanding distortions in the country’s battered economy.
Nearly a third of Egyptians live in poverty, official figures say.