Egypt is expected to experience a significant increase in its foreign currency reserves during the fiscal year 2024/2025, with a surge of $16.20 billion.
A report by U.S. multinational finance firm JPMorgan predicts further rise of $2.60 billion in the following fiscal year, 2025/2026. The report forecasts a growth rate of 4.30 percent for the Egyptian economy in 2025/2026, a notable improvement compared to the 2.8 percent growth achieved in 2023/2024.
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JPMorgan highlights the potential impact of adjustments to fuel prices on Egypt’s inflation outlook. Such adjustments, aimed at reducing the subsidy bill, could pose upside risks to inflation since fuel accounts for about 2 percent of the inflation basket, according to the finance company.
Despite expectations of slower inflation, the Central Bank of Egypt (CBE) is unlikely to implement monetary easing in the current year, according to some analysts.
The CBE intends to maintain a tight monetary policy stance to manage inflation expectations and mitigate currency pressures, as stated in the report.
In March 2024, Egypt’s annual headline urban consumer price index (CPI) inflation decreased to 33.1 percent from 36 percent in February. Additionally, the country’s international reserves experienced a significant increase, jumping $5 billion to reach $40.36 billion by the end of March.
The CBE responded to the economic situation by raising interest rates by 600 basis points (6 percent) in March. A monetary policy meeting is scheduled by the central bank for May 23-24.
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