Egypt – For the fourth consecutive month, annual inflation in Egypt declined during June, as the government and the Central Bank continue their efforts to return to inflation targets.
According to data from the Central Agency for Public Mobilization and Statistics in Egypt, on Wednesday, the inflation rate in June recorded 27.5 percent, compared to 28.1 percent in May.
The inflation figures recorded in June are the lowest since last January, and exceeded more than 35 percent in February 2024, before witnessing a decline since March.
** Reasons for the decline
The decline in inflation in Egypt comes despite the floating of the Egyptian pound on March 6, which stabilized at around 48 pounds per dollar, from 31 pounds previously.
However, the recovery of the parallel currency market was a major reason for the rise in inflation, due to importers resorting to obtaining their need for foreign currency to cover the cost of imports.
The dollar sometimes reached 70 pounds in the parallel market, which means that the difference in the exchange rate with the official market, which amounted to 31 pounds before the float, was borne by the final consumer of imported goods.
Since the flotation of the pound, dollars have begun to flow into Egypt, in the form of foreign investments, financial grants and loans from either the World Bank or the International Monetary Fund.
The total dollar-denominated amounts that have entered the country since the flotation have exceeded $40 billion, according to official government data.
The abundance of dollars led to the end of the parallel currency market, and with it the cessation of traders’ tendency to obtain dollars from channels other than the banking sector, resulting in a decline in commodity prices.
In March, inflation in Egypt fell to 33.3 percent, compared to 35.7 percent in February, the first month of the Egyptian pound’s flotation.
In April, inflation in the country reached 32.5 percent, then fell to 28.1 percent in May, before settling in June at 27.5 percent.
**Down despite support change
The decline in inflation in Egypt also comes despite the 300 percent increase in the price of subsidized bread as of early June, to 20 piasters per loaf, compared to 5 piasters previously.
On March 22, the government also raised fuel prices by one pound for all gasoline categories, and 175 piasters for diesel (one pound consists of 100 piasters).
The Petroleum Products Pricing Committee will meet later this month to determine gasoline prices, whether by fixing or moving them, according to the regular timing of its meetings.
Egyptians are awaiting the new decisions of the committee, affiliated with the Ministry of Petroleum and Mineral Resources, and what it will decide regarding the increase in gasoline prices.
After the Egyptian government approved a 300 percent increase in the prices of subsidized bread, it is preparing to reduce subsidies on electricity and fuel prices in the coming period, according to analysts’ expectations.
According to analyses by global investment banks and analysts at the Egyptian Stock Exchange, inflation in Egypt is expected to rise once more starting in August and September, if the government announces increases in fuel and electricity prices in succession.
On Tuesday, Egyptian Prime Minister Mostafa Madbouly said that his country will gradually raise fuel and electricity prices over the course of a year and a half, to continue the economic and financial reform program that Egypt is implementing.
The Central Bank of Egypt will hold a meeting of its Monetary Policy Committee next Thursday to decide on interest rates on the pound, amid a decline in inflation for the fourth consecutive month.
Interest rates in Egypt are 27.25 percent for deposits and 28.25 percent for lending, and in the last meeting of the Central Bank last month, it decided to keep interest rates unchanged.
Anatolia
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2024-07-13 13:53:41
