Egypt’s annual urban consumer price inflation revved for a third consecutive month to 26.5% in October from 26.4% a month earlier due to fuel price hikes, according to data released by Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS).
The index increased 1.1% month-on-month in October, decelerating from September’s 2.1% jump, CAPMAS noted.
On an annual basis, food and beverage prices, which make up the largest component of the inflation basket, rose by 27.3% compared to 27.7% in September.
Hesham Hamdy, a financial analyst at Naeem Financial, noted in an interview with Asharq Bloomberg that the announced inflation figures were lower than expected, which were around 27.8% including education. However, he added that the education figures were not included in the October index and were pushed to February 2025 marking the start of the second semester and the payment of the remaining school fees.
CAPMAS attributed the acceleration of inflation for the third month to the increase in vegetable prices by 39%, grains and bread by 36.7%, and meat and poultry by 19.7% on an annual basis.
Fueling inflation
It is noteworthy to mention that before the rise started in August, the annual inflation rate slowed down for five consecutive months.
In October, the Egyptian government raised petroleum product prices as part of efforts to reduce its subsidy bill and address the budget deficit. This included a 9.2% increase in diesel prices and higher natural gas rates for households. The move, which marked the third price hike this year, is part of a broader strategy to cut subsidies and improve public finances. Historically, Egypt’s subsidies had made gasoline and bread among the cheapest in the world.
According to Cairo-based investment bank EFG Hermes, the Egyptian government needs to raise fuel prices by an additional 15-20% to eliminate its subsidy burden. This target is set for the end of 2025, with the next fuel-price review scheduled in six months. This aligns with Prime Minister Mostafa Madbouly’s earlier statement that the government plans to gradually phase out fuel subsidies by 2025 to ease the pressure on the state budget.
IMF review
International Monetary Fund (IMF) Managing Director Kristalina Georgieva arrived in Egypt last week to oversee the fourth review of the country’s $8 billion loan program, assess recent economic reforms, and explore options for additional support as Egypt grapples with ongoing economic challenges. Egyptian officials pointed to regional tensions, including the proximity of Gaza and disruptions to Suez Canal revenues from Houthi-related incidents in the Red Sea, as key complicating factors.
A separate IMF mission arrived in Cairo Tuesday to conduct the fourth review of Egypt’s IMF-backed reform agenda, with discussions still underway.
Interest rates
Bloomberg expects that the announced inflation data will likely increase the chances of Egyp’s central bank to keep interest rates unchanged at 27.25% for a fifth consecutive policy meeting when it next convenes on November 21
