Egypt’s inflation rate, which stood around 30 percent in May, is expected to rise by between 3 and 4.5 percentage points following last week’s fuel price hike, Deputy Finance Minister Ahmed Kojak told Reuters last week.
On 25 July, Egypt increased fuel prices by up to 50 percent to help meet the terms of a USD 12 billion (EGP 579.12 billion) International Monetary Fund (IMF) loan agreement.
After the central bank floated the pound currency in November as part of the IMF deal, Egypt’s inflation hit a three-decade high. Despite the inflation rate slowing for the fourth consecutive month to 27.5 percent in June, down from 28.1 percent in May, it remains significantly higher than the Central Bank of Egypt’s (CBE) target range of 5 percent to 9 percent by the end of the year.
The recent decline in inflation does not mean a reduction in the prices of goods but rather a slower rate of increase compared to the same month the previous year. According to the Arab Monetary Fund, Egypt’s inflation rate is projected to be 27 percent in 2024, slowing to 18 percent in 2025 due to targeted measures by the CBE.
The Arab Monetary Fund’s report also highlights the CBE’s aim to stabilize prices through a flexible inflation targeting system, which seeks to minimize inflation fluctuations and limit economic activity volatility.
In its latest monetary policy report, the CBE indicated that inflation is expected to remain stable in 2024, despite potential inflationary pressures from fiscal consolidation measures. Analysts from investment firms told Al-Ahram that the recent increases in diesel and gasoline prices are likely to hinder sustainable inflation reduction in the near term, primarily due to the impact of higher diesel costs on the transportation of goods.
Despite the recent drop in inflation rates, the monthly headline inflation rate reversed its previous downward trend, rising to 1.8 percent in June from -0.8 percent in May.
The Central Agency for Public Mobilization and Statistics (CAPMAS) attributed the annual inflation slowdown primarily to decreases in the prices of poultry and meat (down 3.7 percent), vegetables (down 2.3 percent), postal services (down 4.3 percent), and cereal and bread (down 13.5 percent). In contrast, the monthly inflation rate increased due to rising costs of vegetables and fruits (up 3 percent), clothing and footwear (up 1.2 percent), healthcare services (up 2.7 percent), and utilities, including electricity, fuel, and water (up 0.5 percent).
Comparing June 2024 to June 2023, CAPMAS data revealed significant price hikes in various commodities and services: food and vegetables surged by 30.8 percent, transportation by 17.5 percent, utilities by 12.4 percent, clothing and footwear by 25.9 percent and cultural and entertainment services by 56.6 percent.
The CBE’s Monetary Policy Committee (MPC) convened on 18 July for its first meeting of the fiscal year 2024/2025 and the fourth meeting of 2024. The MPC opted to maintain the CBE’s overnight deposit rate at 27.25 percent, the overnight lending rate at 28.25 percent, and the main operation rate at 27.75 percent.
Since January, the CBE has raised key interest rates by 800 basis points. In its May meeting, the CBE maintained the overnight deposit rate at 27.25 percent, the overnight lending rate at 28.25 percent, and the main operation rate at 27.75 percent, citing recent reductions in inflation.
Addressing inflation is a key priority for Egypt under its loan program with the IMF, which has recently rescheduled its executive board meeting to review Egypt’s progress under the loan program, moving it from 10 to 29 July, without providing further details.
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