Egypt's annual inflation rate reached an all-time high of 39.7% in August, marking a continued escalation of the country's economic crisis, according to official figures released on Sunday. This follows a previous record of 38.2% inflation recorded in July. The nation, the most populous in the Arab world, has been grappling with economic hardship for over a year, during which its currency lost half of its value against the US dollar.
Food and drink prices have seen a significant increase, registering a 71.9% rise compared to August 2022, as announced by the state statistics agency CAPMAS on Sunday. This surge in prices has further strained Egyptian families already struggling to make ends meet.
The economic crisis in Egypt, an import-dependent country, was catalyzed by Russia's invasion of Ukraine last year, which disrupted crucial food supplies and unsettled global markets. In response to these developments, investors withdrew billions from Cairo's foreign reserves, although these remain supported by deposits from wealthy Gulf allies. However, these allies' commitments to purchase Egyptian state assets have not met government targets.
Even before the current crisis, 30% of Egyptians were living below the poverty line, with another 30% at risk of falling into poverty, according to World Bank data.
In recent years, Egypt has relied on financial aid from both Gulf allies and the International Monetary Fund (IMF). Last year, the IMF approved a $3 billion loan for Egypt on the condition of "a permanent shift to a flexible exchange rate regime". This move aligns with similar market-based exchange rate formulas adopted by other countries facing economic challenges, such as Pakistan.
Egypt's external debt bill has tripled over the past decade, reaching a record high of $165.4 billion this year according to Ministry of Planning figures. This situation underscores the severity of Egypt's economic crisis and the challenges it faces in achieving economic stability.
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