Egypt’s annual urban consumer price inflation declined to 25.7 percent in July from 27.5 percent in June, according to the latest data from the Central Agency for Public Mobilization and Statistics (CAPMAS). Egypt’s inflation rate has declined for the last five months after reaching a record high of 38 percent in September 2023.
Prices fell by 0.4 percent month-on-month in July, down from 1.6 percent in June. Food prices declined by 0.3 percent in July. However, they were still 28.5 percent higher than in July 2023.
Price increases impact inflation momentum
In March, Egypt tightened its monetary policy under the $8 billion International Monetary Fund financial support package. However, that program has also required it to increase several domestic prices and let its currency float.
On March 6, the country’s central bank raised interest rates by 600 basis points, bringing total increases in 2024 to 800 basis points.
In addition, the government raised the prices of some subsidized products to support the budget deficit that reached $10.27 billion by June 30.
On June 1, the government raised the price of subsidized bread by 300 percent, and on July 25 the price of fuel by up to 15 percent. The government on August 1 also raised the price of metro tickets and further price increases are expected in the coming months.
Inflation had been slowing from September’s record high, but in February unexpectedly jumped again to 35.7 percent.
The price increases will likely drive monthly inflation momentum as Egypt increases fuel prices and other prices gradually to achieve cost recovery by the end of 2025.
Egyptian pound slides
Amid the decline in inflation and volatile market conditions, the Egyptian pound slid against foreign currencies, inching nearer to EGP50 per U.S. dollar after a recent hike in metro fares and fuel prices.
The currency reached EGP49.27 to the U.S. dollar on Thursday after ranging between EGP47 and EGP48 to the dollar following floatation.
The pound has so far lost close to 60 percent of its value. The lower exchange rates came after the IMF completed its third financial review of Egypt, allowing the government to draw $820 million from the financial support package.
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