• Egyptian inflation expected to decrease in October after hitting 38% in September.
• Median forecast shows annual urban consumer inflation dropping from 38.0% in September to 37.1% in October.
• Inflation steadily rose since June, reaching 35.7%, last seen at 32.95% in July 2017.
• Egypt’s currency depreciated by around 50% against the dollar but remained fixed despite IMF commitments.
According to the median projection derived from a panel of 19 experts, inflation is expected to ease from 38.0% in September to 37.1%, as revealed in a recent Reuters Poll.
The trajectory of inflation in Egypt had been showing a steady upward trend since June, culminating in a record high of 35.7%. This level mirrors the inflation observed in July 2017 when it reached 32.95%. However, there are indications of a recent moderation in inflation.
This positive development is attributed to the government’s decision to curtail the prices of essential food commodities for a six-month period starting mid-October 2023. Furthermore, these vital food items have been granted exemption from customs duties, providing temporary relief from the pressure of inflation.
To counteract inflation, the government initiated an agreement with private producers and retailers on October 10, with a key focus on staple foods such as fava beans, lentils, dairy products, cheese, pasta, rice, sugar, chicken, and eggs.
These items are anticipated to witness a reduction in prices ranging from 15% to 25% over the subsequent six months. On the flip side, the government also took measures to adjust petrol prices upwards by as much as 14.3%. This adjustment was necessitated by the prevailing higher global prices and a weakened exchange rate.
Despite undergoing a depreciation of nearly 50% against the US dollar in the year leading up to March 2023, the Egyptian pound has remained pegged at a fixed rate.
The official exchange rate currently stands at 30.85 pounds to the dollar, whereas in the parallel market, it has experienced a depreciation from 40 pounds to around 48 pounds to the dollar, particularly following the eruption of the Gaza crisis on October 7.
Furthermore, there are emerging expectations that the Central Bank of Egypt (CBE) will reach an agreement with the International Monetary Fund (IMF) in early 2024. The aim of this agreement is to peg the Egyptian pound to a diversified basket of international currencies and gold.
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