Egypt's headline inflation drops for first time in nearly a year

Annual urban consumer inflation slowed to 30.6% in April, down from 32.7% in March, government data shows

People walk outside a currency exchange office in Cairo. The Egyptian pound dropped to a record low against the US dollar earlier this year. EPA

Egypt’s headline inflation decreased to 30.6 per cent in April, down from 32.7 per cent the previous month, data from the country’s statistics agency Capmas has shown.

The decline is the first slowing of the country’s annual urban consumer rate since June last year.

Month-on-month inflation also slowed to 1.7 per cent in April, down from 2.7 per cent in March and 6.5 per cent in February, Capmas data showed.

The country’s annual core inflation rate, which excludes variable items such as food, eased slightly to 38.6 per cent in April from 39.5 per cent the previous month.

The slowdown was caused, in large part, due to a smaller increase in food and beverage prices last month compared to previous months, Capmas said.

Following the economic slowdown brought on by the Covid-19 pandemic, Egypt, a net food importer that relies heavily on grain and tourists from Russia and Ukraine, has also been one of the countries most affected by the war between them.

A 50 per cent depreciation in the value of the Egyptian pound against the dollar following repeated devaluations by the government in an attempt to qualify for a loan from the International Monetary Fund has also sent prices for basic foodstuffs soaring for Egyptians.

However, it is unlikely that the downwards trend will continue, as the government recently raised the price of diesel by 14 per cent.

This has already resulted in an increase in the price of public bus fares, with more price rises expected in a number of industries that rely on diesel to operate.

Furthermore, earlier this week, the Egyptian supply ministry announced it would increase the prices of subsidised food items available at state outlets that benefit holders of ration cards.

The ministry also reduced the amount of sugar doled out to card holders each month in a bid to cover an increased import bill.

Inflation in Egypt has been on a steady incline since June last year, reaching its highest level in six years in March.

In April, S&P Global Ratings revised Egypt’s outlook to negative and predicted further currency depreciation, a continued rise in inflation and the possibility of the country’s external financing needs outgrowing its funding sources.

Fitch Ratings also revised Egypt's outlook to negative last week, citing the lack of economic reforms and challenges to its fiscal system as the main reasons.

It was the first time the credit rating agency had downgraded Egypt since 2013.