Egypt’s economy is facing a dire situation as inflation rates skyrocket with a record-breaking 40% increase. This alarming figure comes just months after the previous record of 38.2% was recorded in July, highlighting the severity of the economic crisis that Egypt is currently grappling with.
The crisis, which has been ongoing for over a year, has seen the country’s currency lose half of its value against the US dollar since early last year.
One of the main factors contributing to the economic turmoil in Egypt is the country’s heavy reliance on imports. The crisis was catalyzed by Russia’s invasion of Ukraine last year, which disrupted crucial food supplies and unsettled global markets.
As a result, food and drink prices alone saw a staggering 71.9% increase compared to August 2022, according to state statistics agency CAPMAS. This sharp increase has put an additional burden on families who were already struggling to make ends meet.
Furthermore, Egypt’s foreign reserves have been significantly depleted as investors have pulled billions of dollars out of the country. While the reserves have been partly supported by deposits from wealthy Gulf allies, these deposits have fallen short of government targets. This has left Egypt heavily dependent on bailouts from both Gulf allies and the International Monetary Fund.
Last year, in an effort to stabilize the economy, the IMF approved a $3 billion loan for Egypt, contingent on the implementation of a flexible exchange rate regime.
The country’s external debt bill has tripled over the past decade, reaching a record high of $165.4 billion this year, as reported by the Ministry of Planning.
Even before this current crisis, a significant portion of the Egyptian population was already living below the poverty line. According to the World Bank, 30% of Egyptians were classified as living in poverty, with another 30% considered vulnerable to falling into poverty.
The increased inflation rates have further exacerbated the economic hardships faced by the most vulnerable members of society.