Over-borrowing from the CBE is the real culprit behind the massive spike ininflation: Egypt’s inflation is symptomatic of a larger problem, that the CBE has been playing loose with the money supply, writes Patrick Werr for The National. He says that since 2011, cash-strapped governments have been forced to resort to extraordinary means to finance budget deficits, as it was constrained by internal politics to raise taxes and cut subsidies. Cue the CBE, which presided over an “exceptionally swift growth in the money supply.” Broad money supply, M2, grew by 22% year-on-year in November (excluding the effect of the EGP float that month). The growth rate in the years immediately before 2011 was hovering at about 10%. Werr blames this increase for the massive spike in inflation, which reached 30% in February, when the EGP float came in November. “The IMF projects that the government will increase its borrowings outstanding from the CBE to EGP 668 bn this fiscal year, up from only EGP 176 bn in FY2011-12,” he said. While both the CBE governor and Finance Minister promised the IMF to limit borrowing from the CBE to a minimum, Werr warns that the pressures resulting from the reform agenda could see the government not follow through on that pledge.