News / Economy

Egypt's Urban Inflation Soars, Adds to Risk of Social Unrest

File - A vendor stands next to his fruit stall as he waits for customers near a mosque in Cairo.
File - A vendor stands next to his fruit stall as he waits for customers near a mosque in Cairo.
Reuters
Egyptian urban consumer inflation soared in November to its highest annual rate in nearly four years, increasing the risk of social unrest and potentially setting up a policy dilemma for the central bank.

Crippled by political turmoil since a popular uprising toppled autocrat Hosni Mubarak in 2011, Egypt's economy expanded just 2.1 percent in the year to June 30.

The central bank has cut interest rates three times by a total of 150 basis points since the army deposed Islamist President Mohamed Morsi in July, most recently - and unexpectedly - by 50 basis points at a meeting last week. The bank said then it was more concerned about boosting growth than taming inflation.

But urban consumer prices rose 13 percent in November year on year, state statistics agency CAPMAS said on Tuesday, the highest rate of increase since January 2010 and well up on October's 10.4 percent.

Food costs, some of which are already heavily subsidized by the government, contributed to the increase.

“At the moment, the central bank is stuck, because it's trying to cut the yield on government debt and at the same time help stimulate the economy and keep inflation in check,” said Angus Blair, chairman of business and economic forecasting think-tank Signet. “You've got an economic dilemma, which they have to try and tackle.”

Spokespeople at the central bank could not immediately be reached for comment on the data, which also showed monthly inflation at 0.9 percent.

But in a statement accompanying Thursday's rate cut decision, it had acknowledged the possibility of higher inflation, referring to an unfavorable base effect caused by low inflation rates at the end of last year.

“While upside risks to the inflation outlook continue to moderate as the possibility of a rebound in international food prices is unlikely in light of recent global developments, annual inflation could increase above... current levels in November and December,” it said.

Egypt's core inflation rate, which strips out subsidized goods and volatile items, including fruit and vegetables, rose to 11.95 percent in the year to November, the central bank said on Tuesday. That's up from 11.15 percent in October.

Rising food prices

The price index for urban food and non-alcoholic beverages rose by almost 20 percent annually. For hotels, cafes and restaurants, the price index gained more than 22 percent, CAPMAS data showed.

“Clearly in a period where there is a restive population, people expect a better standard of living, and it's likely that there will be social repercussions if inflation continues to run at these levels,”  said Blair.

More than 26 percent of Egyptians live below the poverty line, according to the latest CAPMAS data, and the government is hooked on a subsidy regime under which it spends a fifth of its budget keeping energy and some food prices, including bread, well below market cost.

The government also has launched a 29.6-billion-Egyptian pound [$4.3 billion] stimulus package, aided by over $12 billion in aid pledged by Arab Gulf countries, since the army ousted Islamist President Mohamed Morsi in July following mass protests against his rule.

Egyptian Investment Minister Osama Saleh said the government plans to launch a second 24-billion-pound package in January.

The budget reached a deficit of about 14 percent of GDP in the year to June 30, though Thursday's rate cut promises to ease pressure on government finances, with debt yields having fallen at two auctions since then.

You May Like

FIFA Indictments Put Gold Cup Tournament Under Cloud

Experts say US indictments could lead to charges of other world soccer officials, and lead to major shakeup in sport's governance More

Video Seoul Sponsors Korean Unification Fair

At a recent even in Seoul, border communities promoted benefits of increased cooperation and North Korean defectors shared stories of life since the war More

Video VOA EXCLUSIVE: Iraq President Vows to Fight IS 'Until They Are Killed or We Die'

In wide-ranging interview with VOA Persian service reporter, Fuad Masum describes conflict as new type of fight that will take time to win More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Forced to Return Home, Afghan Refugees Face Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.

VOA Blogs

World Currencies

EUR
USD
0.9205
JPY
USD
123.69
GBP
USD
0.6508
CAD
USD
1.2456
INR
USD
64.051

Rates may not be current.