IMF Expects Gradual Decline in Egypt's Inflation Rate

The International Monetary Fund (IMF) expects the inflation rate in Egypt to decline gradually as the scarcity of foreign exchange recedes and the tightening of monetary policy takes hold.

However, the IMF indicated in its report on the regional economic prospects for the Middle East and Central Asia, that although the Egyptian authorities tightened monetary policy earlier this year to reduce inflation, there may be a need for more tightening measures.

The Fund said that the scarcity of foreign exchange in Egypt hampered economic activity until Egypt recently made necessary adjustments to its macroeconomic policy, referring to the Central Bank’s decisions on March 6 to liberalize the exchange rate and raise key interest rates by 600 basis points.

The Fund said that Egypt was the only one in the region that raised interest rates by 800 basis points since October 2023.

The Fund stated that the situation in the Red Sea is expected to continue to affect activity in Egypt in the remainder of the fiscal year. It added that, as a result, it revised Egypt's economic growth forecast downward by 0.6%  compared to it estimates issued in October to 3% growth in 2024.

In the World Economic Outlook report issued earlier this week, the Fund expected Egypt’s economy to grow by 4.4% in the fiscal year 2024/25.

Meantime, core inflation in Egypt, which excludes volatile commodity prices, was 33.7% last March, down from 35.1% in February.

At the same time, the annual rate of inflation in Egyptian cities reached 33.3% in March, compared to 35.7% in February.

According to the Fund’s data issued within the World Economic Outlook report, the country’s annual average inflation is expected to reach 32.5% this year, falling to 25.7% in 2025.

The Fund stated that the $35 billion investment deal concluded by Egypt with ADQ Holding Company in Abu Dhabi will contribute to alleviating the financial pressures facing the country in the near term and reduce dependence on the local financial system.

The deal will provide $24 billion in new financing for the development of the Ras El Hekma area, and also includes transferring a dollar deposit with the Central Bank of Egypt (CBE) of about $11 billion to the Egyptian pound for investment throughout Egypt.