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Egypt's economy picks up with core inflation rate hike

Xinhua, July 11, 2016 Adjust font size:

Egypt's core inflation rate saw an annual increase to reach 12.37 percent in June compared to 12.23 percent in May, the Central Bank of Egypt (CBE) said in a statement Sunday.

"Core CPI (Consumer Price Index) computed by the CBE increased by 0.74 percent (month/month) in June 2016 compared to 3.15 percent in May 2016. Accordingly, the annual rate increased to 12.37 percent in June from 12.23 percent in May," the statement said.

Experts believe the rise of the inflation rate, which means the decrease of the purchasing power of the local currency, is a result of the devaluation of the Egyptian pound against the U.S. dollar, indicating economic recession.

The CBE has been suffering from declining foreign currency reserves over the past five years of political turmoil, falling from 36 billion dollars in early 2011 to 17.5 billion dollars as of end of May 2016.

Since January 2011 uprising that toppled long-time ruler Hosni Mubarak, the core inflation rate in Egypt has always been less than 10 percent until it jumped to 11.15 percent in August 2013, then rose later to 12.23 percent in May 2016 and finally to 12.37 percent in June 2016.

As for the headline inflation, the CBE quoted the country's statistics authority as saying earlier on Sunday that it annually increased to 13.97 percent in June compared to 12.3 percent in May, "partly on the back of unfavorable base effect from the previous year."

The recent dollar hike in Egypt made the dollar exchange rate jumps to 8.85 pounds in the official market and about 11 pounds in the black market, making the largest hike and the biggest exchange rate gap in Egypt's modern history.

Meanwhile, the Egyptian government is currently struggling to reduce a budget deficit of over 35 billion dollars in the outgoing fiscal year 2015/2016, representing 11.2 percent of the country's gross domestic product .

On Sunday, the Ministry of Finance offered bonds to borrow about 2.3 billion dollars from the banks operating in the local market to use for covering the budget deficit, according to state-run Al-Ahram news website. Endit