Egypt's Inflation Rate Continues Downward Trend, But Challenges Remain

© AP Photo / Amr NabilA man carries a bread tray at a popular market in Cairo, Egypt, Friday, June 7, 2024.
A man carries a bread tray at a popular market in Cairo, Egypt, Friday, June 7, 2024.  - Sputnik Africa, 1920, 10.07.2024
Egypt has been implementing austerity measures since March, supported by an expanded $8 billion financial package from the International Monetary Fund (IMF). The IMF has postponed its third review of Egypt's program to July 29. At the meeting, the IMF's executive board is expected to disburse an $820 million payment to Cairo.
Egypt's annual urban inflation rate eased for the fourth consecutive month in June, dropping to 27.5% from 28.1% in May, according to the country's statistics agency. This decline continues a trend initiated in September 2023, when inflation reached a record high of 38%.
Cairo's shift to an inflation targeting model and a flexible exchange rate are believed to have contributed to the recent decrease.
However, analysts warn of potential threats that could disrupt this positive trend, particularly price increases for essential goods like fuel, medicine, fertilizers, and natural gas.
Former Egyptian Foreign Minister Mohamed Orabi during an interview with Sputnik in Cairo, Egypt, in July 2024. - Sputnik Africa, 1920, 08.07.2024
Joining BRICS a Dream Come True for Egypt, a Win-Win Situation, Says Ex-Foreign Minister Orabi
The recent 300% increase in the price of subsidized bread, effective June 1, has fueled food and beverage inflation to 30.8% year-on-year and 3% month-on-month.
While bread's relatively small weight in the consumer basket has limited the impact of this hike, it has been offset by disinflation in other food items and a favorable base effect.
Mona Bedeir of Al Baraka Bank noted that while the base-year effect is currently mitigating some price increases, unexpected factors could still pose challenges.
"Such risks include power shedding policy which impacted fertiliser factories and could eventually impact the harvest of some crops. Climate change and the heat wave could also play a similar role, leading to higher food inflation," Bedeir told Western media.