Inflationary wave hits markets after dollar value appreciates to EGP 9.15 in exchange offices

Mohamed Ayyad
3 Min Read
An Egyptian baker prepares "baladi" bread in a local bakery in the Nile Delta city of Mahala (AFP FILE PHOTO/CRIS BOURONCLE)

Experts expect that Egypt will witness an inflationary wave following the recent appreciation in the value of the US dollar value to 9.15 against the Egyptian pound in the informal market.

Economist at CI Asset Management Noaman Khalid said the Central Bank of Egypt’s (CBE) recent decision to raise the cap on dollar deposit for importers to $1m will ignite increased demand for US dollars in the informal market, which could further its price against the pound.

“President Abdel Fattah Al-Sisi and Prime Minister Sherif Ismail made recent remarks that the government will initiate tough and painful procedures. It will hint to exchange offices that the pound’s value may be reduced against dollar, which contributed to raise the dollar price in informal markets,” Khalid said and urged fiscal and monetary policy makers to coordinate in their work.

Khalid said average citizens will be affected negatively by the recent developments. The difference between the informal and formal market dollar value will be added onto the final price of imported products in the Egyptian market.

A security guard in Dokki, Ahmed Mustafa, told Daily News Egypt expressed fear after the recent rise in the value of the dollar against Egyptian pound. “We are terrified from the increase of food and vegetables prices,” he said. “I hope the government intervenes to protect us from the prices rise, which will severely burden us with more loads as our income are weak and unstable.”

Emam Abu Bakr, the head of the research department in Prime Investment Company, agreed the that the government is required to adopt certain procedures to confront the inflationary wave, such as subsidising certain commodities to ensure their sale at suitable prices.

CI Capital has predicted a high average inflation rate, ranging between 11% and 11.5% in 2016 and Prime Investment expects the inflation rate will reach 10.8%.

The inflation in consumer prices declined to 10.1% compared to 11.1% in December, according to information obtained from the Central Agency for Public Mobilisation and Statistics (CAPMAS).

“The real price of the dollar is in the black market since it reflects the demand and supply of the dollar,” Abu Bakr said.  According to Abu Bakr, the formal market price does reflect the real value of the dollar.

“There is no supervision on the market prices,” Khalid said. The rise in prices will include not only imported commodities or those commodities which rely on imported components, but also the majority of local goods and services.

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