CAIRO

Egypt expects inflation to start easing by November or December, a year after abandoning its currency peg and seeing prices soar as the Egyptian pound lost half its value, Finance Minister Amr Al Garhy said on Thursday.

Annual urban consumer price inflation rose last month to its highest level in more than three decades, hitting 30.2 per cent.

In cities and towns, food and beverage inflation reached 40.5 per cent year on year.

“We expect the inflation rate to ease starting in November or December,” Al Garhy told a conference in Cairo. That time frame matches economists’ expectations for inflation to remain high until the final quarter of the year, when the financial shock of November’s currency move will drop out of year-on-year figures.

Garhy was speaking a day after the cabinet approved a proposed 2017-18 budget which will increase expenditure in local currency terms by nearly 20 per cent to 1.188 trillion Egyptian pounds (Dh239.1 billion, $65.35 billion).

The budget, which has yet to be passed by parliament, targets GDP growth of 4.6 per cent in the coming financial year, which starts on July 1. It foresees a budget deficit of 9.1 per cent, compared to an expected deficit of 10.5-10.7 per cent in the current year.

Garhy said the government was trying to control debt and the deficit level to help its efforts to curb inflation.

Food subsidies

But sources said the government was also considering an increase in spending on food subsidies to tens of millions of Egyptians to offset the impact of rising prices from economic reforms which helped it secure a $12 billion IMF loan programme.

“The budget has presented great difficulties and challenges, between implementing the economic reforms on one hand and retaining the social protection plan on the other,” Garhy said.

The budget sees food subsidy spending of 62.585 billion Egyptian pounds in the coming financial year, up from 49.544 billion Egyptian pounds expected for 2016-17.

Around 70 million of Egypt’s 92 million population are beneficiaries of a subsidy card programme that currently entitles them to 21 Egyptian pounds ($1.16) month of goods offered at state-approved supermarkets in addition to five loaves of bread per person per day.

Two sources at the finance ministry told Reuters the government was considering raising the monthly subsidy by 29 per cent to 27 Egyptian pounds per person.

Supply Minister Ali Moselhy said the draft budget sent to ministers on Wednesday had not included such an increase in monthly subsidies.

Garhy declined to comment on the issue: “All things are being considered ... I don’t want to go into them now”.

AfDB says it disburses second $500m loan tranche to Egypt

CAIRO

The African Development Bank has disbursed a $500 million loan to Egypt, the bank’s representative in Cairo told Reuters on Thursday. Leila Mokaddem said the disbursal, the second of three expected loan tranches from the bank to Egypt, came into effect on Thursday and the funds would be received early next week. Egypt has been negotiating billions of dollars in aid from various lenders to help revive its economy, battered by political and economic upheaval since a 2011 uprising.

-Reuters