Official figures released on Monday revealed that Egypt’s annual inflation reached 36.8% in June, marking an all-time high for the country grappling with a severe economic crisis. This surpasses the previous record of 34.2% in July 2017, which followed a sharp currency devaluation associated with an International Monetary Fund (IMF) bailout loan.
The Egyptian pound has significantly depreciated against the dollar since early last year, causing prices to skyrocket and placing an additional burden on families in the import-dependent nation. The latest figures indicate a nearly 37% increase compared to June of the previous year, with a two percent month-on-month rise from May. Although previous data had shown a slight easing of inflation in recent months, the prices of food and beverages alone witnessed a staggering 64.9% surge compared to June 2022, as reported by the state statistics agency CAPMAS.
The economic crisis in Egypt has been exacerbated by Russia’s invasion of Ukraine, which disrupted crucial food imports. Even prior to this, approximately 30% of Egyptians were already living below the poverty line, according to the World Bank.
The global market turmoil caused by the invasion led to significant capital outflows from Cairo’s foreign reserves. While there has been a slight increase in reserves this year, reaching $34.8 billion in March (up $500 million from February), they are still $7 billion less than pre-war levels. Out of these reserves, approximately $28 billion consists of deposits from wealthy Gulf allies, whose plans to purchase Egyptian state assets have stalled in recent months.
Egypt, the most populous country in the Arab world, has relied on bailouts from Gulf allies and the IMF in recent years. In 2020, the IMF approved a $3 billion loan for Egypt, contingent on a shift to a flexible exchange rate regime.
Moody’s rating agency identifies Egypt as one of the five economies at the highest risk of defaulting on its foreign debt. The country’s external debt has tripled over the past decade, reaching a record high of $165.4 billion this year, according to Ministry of Planning figures.