The annual inflation rate in Egypt was 4.5% in March of 2021, unchanged from the previous month. Main upward pressure came from prices of food commodities by 1.1 % compared to -0.5% in February, attributed to the hike in costs of some commodities such as fruits and meat ahead of the Ramadan month.
On a monthly basis, consumer prices inched up 0.6%, the biggest increase in four months, according to CAPMAS.
The Central Bank of Egypt (CBE) expected that annual inflation will continue to record single digits during the coming period, with the possibility that it will be theoretically affected by the negative impact of the base year related to the return of monthly general inflation rates to their normal levels in 2021.
According to the Monetary Policy Committee (MPC) report released on Sunday, the central bank believes that annual rates will continue to record rates close to the average target range of 7% during 2022.
The central bank emphasized the balance of risks, which surround the baseline scenario of inflation expectations stem in a stronger than expected transition from global commodity prices to domestic inflation, posing risks and thus an upward trend.
While the risks from the downward trend stem in recording lower than expected inflation rates for food commodities in 2021 and 2022, in addition to the spread of the pandemic and its repercussions that lead to high uncertainty regarding the global economic outlook.
The Central Bank indicated that monetary policy tools will continue to be used to control inflation expectations and contain inflationary pressures from the demand side and the secondary effects of supply shocks, which may lead to deviation of inflation from the targeted rates.
It explained that inflation may deviate from the stated target rates due to factors outside the scope of monetary policy influence.
At the global level, the bank pointed out that economic activity reflects the recovery of the economies of different countries and sectors unevenly, in light of the continuing impact of the spread of the virus, which casts a shadow on future prospects as the path of the global economic recovery remains largely dependent on the effectiveness and rapid distribution of vaccines.
The central Bank expected the continuation of favorable financial conditions that support economic activity in the medium term despite the noticeable increase in global bond yields, which will decease demand on local ones.
Moreover, global prices of petroleum, food and other commodities rose, registering their highest level since the spread of the pandemic, raising the uncertainty about the future path of their prices.
The increase in oil prices was driven by developments on the supply side, including cuts in supply ,while other global commodity prices were affected by both supply and demand factors.
Global prices of basic food commodities are expected to rise in 2021 with potential surrounding risks arising from rising energy costs.
Egypt’s long-term external debt
The Central Bank of Egypt (CBE) revealed that Egypt’s annual external debt rose by $16.5 billion or 14.7% in December, recording $129.19 billion compared to $112.67 billion, year-on-year.
CBE said, in data published on its official website, that long-term external debt recorded an increase by about $15.85 billion at the rate of 15.63% to reach $ 117.24 billion by the end of December 2020, compared to $101.37 billion, year-on-year.
On a quarterly basis, it rose 3.7% from 113.014 billion last September.
The long-term external debt increased marginally to reach 90.74% of the total debt at the end of the year 2020, compared to 89.98% in 2019.
Egypt’s short-term external debt
CBE stated that Egypt’s total short-term external debt rose to $11.959 billion by the end of 2020, compared to $11.284 billion, year-on-year. On a quarterly basis, Egypt managed to decrease the short-term external debt by $365.1 million compared to $12.324 billion in September 2020.
Moreover, the government’s short-term external debt rose from zero in by the end of the year 2019 to $2 billion by the end of 2020.
With regard to the the central bank’s debt balances, data showed a decline of $1.85 billion on an annual basis to record $26.003 billion by the end of 2020 from $27.851 billion a year earlier, with a total decline of 6.64%.
The bank’s debt balances, however, rose slightly during the last quarter of the year by approximately $8 million.