Egypt’s Headline Inflation Climbs To 26.4% In September

October 9, 2024

 

Egypt’s annual urban consumer price inflation increased for the second consecutive month in September, rising to 26.4% from 26.2% in August, driven by a significant surge in energy costs, according to official data released Wednesday.

Egypt’s inflation rises

The index rose by 2.1% month-on-month, matching the rate from August, and reversing a 0.4% decline in July, according to data from Egypt’s statistics agency, CAPMAS.

Food and beverage prices, the largest component of the inflation basket, increased by 27.7% compared to the previous year. On a monthly basis, food prices rose by 2.6% in September, up from 1.8% in August.

September’s inflation was partly driven by fuel price hikes of 10-15% at the end of July, a 25-33% increase in metro ticket prices in early August, and a 21-31% rise in electricity tariffs during August and September.

In June, authorities raised the price of subsidized bread by 300%, although the overall inflationary impact was minimal.

Interest rates

Inflation data could increase the likelihood that the central bank will maintain interest rates at 27.25% for a fourth consecutive policy meeting when officials gather on October 17.

Egypt’s central bank held its overnight interest rates steady in September, noting that inflation pressures had eased but economic growth had slowed.

In a statement, the bank confirmed that the lending rate remained at 28.25%, while the deposit rate stayed at 27.25%.

This marked the third time the Central Bank of Egypt (CBE) kept rates unchanged since a 600 basis point hike on March 6, coinciding with the signing of an $8 billion financial support agreement with the International Monetary Fund (IMF)

IMF mission

An IMF mission is scheduled to arrive in Cairo in November to conduct the fourth review of Egypt’s program, according to Minister of Planning, Economic Development, and International Cooperation Rania Al Mashat.

As part of an $8 billion financial support package agreed upon in March, Egypt has implemented stricter monetary policies, which included increases in several domestic prices and a devaluation of the Egyptian currency.

In July, the IMF completed its third review of Egypt’s Extended Fund Facility (EFF) loan arrangement, enabling the country to access $820 million to bolster macroeconomic stabilization efforts and implement further economic reforms.

At that time, the IMF emphasized that geopolitical tensions stemming from Israel’s war on Gaza and the Red Sea crisis, along with Egypt’s domestic policy and structural challenges, require ongoing commitment to fulfill program objectives.