This reading is the highest in almost five years.

The annual urban inflation rate accelerated to 25.8 percent in January 2023, up from 21.3 percent in December 2022.

The figures significantly surpass the target set by the Central Bank of Egypt at seven percent (±2 percent) through the end of the year.

CAPMAS attributed the spike in annual inflation mainly to the increase in the prices of food and beverages, restaurants and hotels, culture and entertainment commodities and other services by 48.1 percent, 42.8 percent, 30.6 percent, and 21.9 percent, respectively.

The prices of other commodities and services hiked by between 7.2 percent and 13.9 percent.

The agency said the increase in monthly inflation was primarily due to the rise in the prices of food and beverages (10.2 percent), restaurant and hotel services (8.2 percent), healthcare (1.7 percent), and furniture and maintenance (3.4 percent).

Egypt’s inflation has started its acceleration since the onset of the war in Ukraine, keeping its place in the double digits zone and reaching the highest level in years.

The local market is currently experiencing sharp hikes in commodity and service prices, which are expected to continue over the coming months, especially during the Ramadan season, starting at the end of March.

Under the $3 billion loan programme, which came into effect in late December, Egypt is committed to a flexible exchange rate monetary policy regime and to bringing down the inflation rate to seven percent by the end of the programme in FY2025/2026.

The Egyptian pound has lost over 50 percent of its value against the US dollar, performing at the lowest level since 2016. The US dollar is currently traded for over EGP 30.

The CBE hiked the key interest rates by a total of eight percent (800 bps) over 2022. It also pledged to support the monitoring of inflation with a Monetary Policy Consultation Clause (MPCC), which will trigger consultations with IMF staff when annual headline urban consumer price inflation falls outside the CBE’s inflation target of seven percent (±2 percent), and with the fund’s Executive Board if inflation falls outside the outer three to 16 percent in March 2023, and three to 15 percent in June 2023.