Egypt’s central bank governor Hassan Abdalla said on Thursday the preexisting supply chain problems are among the key reasons behind the country’s mounting inflation rates.
The Egyptian official made his remarks during the Challenges in Monetary Policy Implementation Amid Financial Turmoil in the Middle East & North Africa and Central Asia session on the sidelines of the International Monetary Fund and World Bank’s annual spring meetings in Washington.
During the session, he was asked about the external adjustments that the Egyptian economy has undergone.
“Egypt has been on the right path prior to recent global events, with financial development and stability, with inflation in single digits and reserves that are more than adequate, but we have been faced by a double hit, we have had hot money hurling out, and with the imports bill, mainly because we import a lot of food and oil, have gone up dramatically,” said Abdalla.
The Central Bank of Egypt’s (CBE) current main focus is to curb inflation, but the issue should not be only looked at through monetary policy, he added.
“We have been making a lot of models and analysing our inflation, and a lot of it is imported, a lot of it is due to from supply problems, not just supply prices, including a backlog from previous regulations,” Abdullah elaborated.
Egypt increasing interest rates by 10 percent, or 1000 basis points during last year alone, as well as the decrease in the country’s currency value, has been feeding into inflation, and the solution is to work on relaxing supply issues and increase competition, which will result in a healthier and faster curb of inflation, Abdalla concluded.
The CBE has recently raised its benchmark interest rates by two percent in late March, the central bank’s first time in 2023, as it works on curbing the soaring inflation amidst the global economic crisis.
