File Photo: Egypt's finance minister Amr El-Garhy speaks during a press conference (Photo: AP)
Egypt expects inflation to start easing by November or December, a year after abandoning its currency peg and seeing prices soar as the pound lost half its value, Finance Minister Amr El-Garhy said on Thursday.
Annual urban consumer price inflation rose last month to its highest level in more than three decades, hitting 30.2 percent. In cities and towns, food and beverage inflation reached 40.5 percent year on year.
"We expect the inflation rate to ease starting in November or December," Garhy told a conference in Cairo. That time frame matches economists' expectations for inflation to remain high until final quarter of the year, when the financial shock of November's currency move will drop out of year-on-year figures.
Garhy was speaking a day after cabinet approved a proposed 2017-18 budget which will increase expenditure in local currency terms by nearly 20 percent to 1.188 trillion Egyptian pounds ($65.35 billion).
The budget, which has yet to be passed by parliament, targets GDP growth of 4.6 percent in the coming financial year, which starts on July 1. It foresees a budget deficit of 9.1 percent, compared to an expected 10.5-10.7 percent in the current year.
Garhy said the government was trying to control debt and the deficit level to help its efforts to curb inflation.
But sources said the government was also considering an increase in spending on food subsidies to tens of millions of Egyptians to offset the impact of rising prices from economic reforms which helped it secure a $12 billion IMF loan programme.
"The budget has presented great difficulties and challenges, between implementing the economic reforms on one hand and retaining the social protection plan on the other," Garhy said.
The budget sees food subsidy spending of 62.585 billion pounds in the coming financial year, up from 49.544 billion expected for 2016-17.
Around 70 million of the country's 92 million population are beneficiaries of a subsidy card programme that currently entitles them to 21 Egyptian pounds ($1.16) month of goods offered at state-approved supermarkets in addition to five loaves of bread per person per day.