Egypt’s inflation drops for third consecutive month amid currency devaluation concerns

Egypt’s inflation dropped for a third consecutive month in December, but that trend may be halted by the further devaluation of its currency in the coming weeks.

The country’s annual urban consumer price inflation rate eased to 33.7 per cent last month, down from 34.6 per cent in November and 35.8 per cent in October.

December’s figure marked the lowest rate since May, data published on Wednesday by the country’s statistics agency, Capmas, showed.

Inflation hit a record 38 per cent in September last year.

The drop in inflation last month comes amid growing speculation that Egypt will further devalue its pound, a move that is certain to increase prices that were already soaring. Devaluation would hit food prices hard.

Egypt has devalued its currency three times since early last year, causing the pound to shed about 50 per cent of its value.

The dollar has been trading at banks at about 31 pounds for months, but is selling at about 50 pounds on the parallel market.

The weakening currency adds to an economic crisis defined by a persistent foreign currency crunch and rapidly growing debt.

The lack of foreign exchange flexibility played a part in derailing a $3 billion rescue package agreed on with the International Monetary Fund in December 2022.

US Treasury Secretary Janet Yellen met senior Egyptian finance officials in Washington this week amid talks between Cairo and the IMF on expanding the rescue package.

The IMF delayed disbursements of about $700 million last year.

Inflation could surge again this month amid price increases for key services including electricity and internet, as well as higher fares on the Cairo metro network used daily by about five million commuters.

The Egyptian government has said the country’s economic challenges were caused by the Covid-19 pandemic and Russia-Ukraine war.

The country’s annual import bill runs at about $100 billion, with Egypt often the world’s largest wheat importer.

Critics have said economic issues are partially due to excessive borrowing and plans for multibillion-dollar infrastructure projects, including new cities.