Egypt’s Inflation Slows to 25.7% in July Amid Lower Food Prices and Wheat Procurement

Egypt’s annual urban consumer price inflation dropped to 25.7% in July, down from 27.5% in June, according to the country’s statistics agency, CAPMAS. The faster-than-expected decline was supported by a 0.3% decrease in food prices, helping to stabilize the economy amid ongoing challenges.

Egypt's Inflation Drops to 25.7% in July, Driven by Lower Food Prices and Strategic Wheat Imports

On August 8, the country's statistics agency CAPMAS reported that Egypt's annual urban consumer price inflation decreased from 27.5 percent in June to 25.7 percent in July. According to Arab News, this rate of decline was more rapid than analysts had anticipated.

Prices decreased by 0.4 percent in July compared to 1.6 percent in June monthly. Although food prices decreased by 0.3 percent in July, they were still 28.5 percent higher than a year ago.

Egypt is a significant wheat importer, importing approximately 5.5 million kilograms annually to supply subsidized bread to millions of individuals.

Egypt's state grains buyer, GASC, announced on August 7 that it had acquired 36,600 tonnes of sunflower oil through an international procurement.

The purchase comprised 24,600 tonnes scheduled for delivery between October 15 and October 31 and 12,000 tonnes planned for delivery between November 1 and November 15.

In this tender, GASC did not acquire any soybean oil.

Earlier this week, Egypt held its largest-ever wheat procurement, importing 3.8 million tonnes to take advantage of the global wheat price decline to four-year lows.

Securing wheat at reduced prices could substantially reduce Egypt's import bill, thereby supporting economic stabilization initiatives.

Inflation was anticipated to slow to a median of 26.6 percent in July, extending a deceleration that commenced in September, when inflation reached a zenith of 38.0 percent, according to a poll of 18 analysts.

IMF Support Spurs Egypt to Tighten Monetary Policy, Leading to Higher Domestic Prices and Currency Devaluation

Egypt signed a $8 billion financial support package from the International Monetary Fund in March, tightening its monetary policy. However, this program has also necessitated the government to increase numerous domestic prices and allow its currency to plummet.

On March 6, the central bank increased interest rates by 600 basis points, bringing the total number of basis points raised in 2024 to 800.

The government increased the price of certain subsidized products to address a budget deficit of 505 billion Egyptian pounds ($10.27 billion) in a 3.016 trillion-pound budget for the year ending June 30.

The government increased the price of subsidized bread by 300 percent on June 1 and the cost of petroleum by up to 15 percent on July 25.

According to Finance Minister Kouchouk, the country's food subsidies increased by 10% yearly in 2023/24, reaching 133 billion Egyptian pounds ($2.7 billion). The subsidy increase reflects the government's initiative to assist its citizenry in the face of increasing expenses.