Strong growth in food prices results in a rise overall inflation rate (Photo: Ap)
Egypt’s urban Consumer Price Index (CPI) grew by 8.1 percent in the 12 months to April, recording 133.8 points, state statistics body (CAPMAS) announced on Thursday.
The annual urban inflation rate in the 12 months to March 2013 was 7.6 percent.
"This is in line with our expectations... You have a number of drivers, the weakening pound, energy shortages and the measures the government is taking to narrow its deficit," EFG-Hermes economist Mohamed Abu Basha said.
Egypt's pound has officially lost more than 15 percent of its value against the US dollar since the beginning of 2013, after the Central Bank of Egypt (CBE) ceased to unconditionally support the local currency.
The government, for its part, is adopting an economic programme that involves a string of austerity measures that include reducing energy subsidies that eat up a fifth of the country’s budget, and raising sales tax on select items to broaden the tax base.
While unpopular by nature, Egypt is pushing the measures to secure a $4.8 billion loan from the International Monetary Fund (IMF).
"Earlier in the year there were two hikes of electricity prices... We are still expecting an increase in sales tax for a number of goods and services and then the plan to reduce subsidies will increase inflation further," Abu Basha said.
Month-on-month, the urban inflation rate grew by 1.5 percent in April compared to March 2013, CAPMAS stated.
The overall inflation rate in urban and rural areas reached 8.8 percent in April, compared to 8.2 percent a month earlier. The hike was mainly driven by the growth in prices of food and beverages, which saw an annual rise in prices of 9.7 percent.
Egypt has seen its foreign currency reserves drop by more than $20 billion since the uprising that swept Hosni Mubarak from power in February 2011.
The central bank announced on Wednesday that reserves had climbed by $1 billion to $14.4 billion in April, but only thanks to a $2 billion deposit by Libya at the Egyptian central bank.