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Annual inflation drops while foreign reserves rise - Daily News Egypt

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Annual inflation drops while foreign reserves rise

Revenue consistency prompts rise of foreign reserves for fourth consecutive month and the government’s negotiations with merchants lead to prices control, experts say


Revenue consistency prompts rise of foreign reserves for fourth consecutive month and the government’s negotiations with merchants lead to prices control, experts say (AFP Photo)
Revenue consistency prompts rise of foreign reserves for fourth consecutive month and the government’s negotiations with merchants lead to prices control, experts say
(AFP Photo)

Annual inflation decreased to 8.87% in April, compared to 9.82% in March, while international foreign reserves surged to reach $17.48bn, the Central Agency for Public Mobilization and Statistics (CAPMAS) and the Central Bank of Egypt (CBE) announced Thursday.

Mahmoud El-Askalani, the president of the Citizens Against Price Rises Association, attributed this decrease to the ongoing negotiations between the government and merchants.

“Prime Minister Ibrahim Mehleb has been playing a significant role in leading the ongoing negotiations with merchants to lower their prices,” El-Askalani said.

He pointed out that the return of the Food Industries Holding Company to the Ministry of Supply and Internal Trade was a “helpful factor in reducing prices”.

Headline consumer price index (CPI) increased by 0.6% month on month in April, compared to 0.68% month on month in March.

“Core CPI, computed by the Central Bank of Egypt, increased by 0.25% month on month in April compared to 0.7% month on month in March,” the CBE noted in an official statement.

“The annual rate decreased to 9.11% in April from 9.90% in March,” the CBE added.

The foreign reserves, on the other hand, witnessed a minimal surge of $0.07bn, rising from March’s $17.41bn.

Finance professor at Cairo University Alaa Mostafa explained that the relationship between inflation and foreign reserves is inversely proportionate.

Mostafa added that the gap between exchange prices at banks and currency exchanges influence inflation.

“As this gap increases, one can expect an increase in the inflation rates,” Mostafa said.

On the reason behind the gradual increase in foreign reserves, Mostafa said the scheduled receipt of grants and aids from abroad played a notable role.

“When the government witnesses delays in the pledged grants it has to turn to the foreign reserves to make purchases,” Mostafa said, adding that “any decline in the estimated revenues of the country, such as tourism, negatively influences the foreign reserves.”

“It is because no decline was noted in the estimated revenues, the foreign reserves have continued to climb,” Mostafa added.

Foreign reserves declined continuously from September until the end of December. At the end of September foreign reserves amounted $18.7bn, a $0.2bn drop from August numbers.  Reserves fell to $18.59bn in October, $17.76bn in November and $17.05bn in December. The rise of reserves started in January reaching $17.105bn and continued through February to register $17.3bn.

In March, the governor of the CBE said that foreign reserves are secure and on the rise due to “revenue increases the country witnessed during the past period”.

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https://wwww.dailynewssegypt.com/2014/05/10/annual-inflation-drops-foreign-reserves-rise/
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