Egypt inflation rockets to 19.7%

Consumer prices in urban parts of country hit 19-year high on sharp rise in fuel and food costs.
Egypt inflation rockets to 19.7%
By Wael Gamal
Tue 10 Jun 2008 01:08 PM

Consumer prices in urban parts of Egypt rose 19.7 percent in the year to May, a 19-year high for inflation, the state statistics agency CAPMAS said on Tuesday.

The inflation rate compared with 16.4 percent in the year to April, itself a three-year high.

Sharp rises in the prices of fuel, transport and certain foodstuffs were among the main factors behind the new figure. The government raised fuel prices by between 35 and 57 percent in the first week of May.

The fuel price hikes were to raise the revenues needed to give public-sector employees a 30 percent salary increase, itself a response to earlier inflation.

High prices, especially of food, have been the government's biggest headache throughout the year. It has responded by making more cheap food available on a ration-card system.

Food prices were a factor in riots in April in the Nile Delta town of Mahalla, a centre for the textile industry.

CAPMAS said prices in the country as a whole rose 21.1 percent in the year to May, compared to 15.8 percent in the year to March. In the countryside prices rose 22.9 percent, compared to 17.6 in the year to March.

The rural and whole-country indexes are updated only every other month, so economists focus on the monthly urban index.

The statistics agency said that urban food prices rose 2.7 percent in the month to May and transport costs across the country rose 13 percent in the two months to May.

In the one year to May, the prices of bread and grains rose 50.8 percent, edible oils by 51.2 percent, fruit by 24.9 percent and vegetables by 27.6 percent.

Food inflation has hit the poor especially hard because many of them spend more than half of their income on food.

Reham El Desoki, senior economist at Beltone Financial, said the new inflation figures were in line with their expectations.

"We had expected the CPI [consumer price index] would rise to 20 percent at least in the period following the May 5 decisions (on fuel and other prices)," she said.

"We expect the second round effects to continue over the next few months until the effect of the energy price hikes runs its course," she added. (Reuters)

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