Egypt’s annual consumer inflation rate fell to 12.5% in February, nearly half of January’s 23.2%, according to official data released on Monday. The decline comes as the country starts to recover from one of its worst economic crises.
While inflation has been easing in recent months, experts attribute the sharp drop to a base effect. Economist Wael el-Nahas explained that inflation appears lower because it is being compared to last year’s significant price spikes, which saw inflation reach 36%.
The Central Agency for Public Mobilization and Statistics reported that the monthly inflation rate slightly decreased to 1.4% in February, down from 1.6% in January.
Currency Woes and Economic Pressures
Egypt’s economy has struggled with a severe foreign currency shortage, which led to a parallel market crisis early last year. Rising prices for consumer goods placed immense pressure on households, particularly in urban areas.
A currency devaluation in March 2024, along with over $50 billion in financial aid from the International Monetary Fund (IMF), the World Bank, and the United Arab Emirates, has helped stabilize the situation. However, many Egyptians continue to face rising costs and reduced purchasing power.
Since February 2022, the Egyptian pound has lost over 60% of its value, and inflation peaked at nearly 40% in August 2023. To meet IMF loan conditions, the government has implemented several economic reforms, including three fuel price hikes in 2024.
The IMF board is set to review Egypt’s economic program on Monday, with plans to approve a $1.2 billion loan installment. The global lender also announced plans for a new loan agreement, estimated to be worth just over $1 billion.
Mounting Foreign Debt and Regional Instability
Despite recent economic measures, Egypt remains burdened by soaring foreign debt, which has quadrupled since 2015, reaching $155.2 billion by September 2024. Much of this debt is linked to large-scale infrastructure projects, including the construction of a new capital city east of Cairo.
Meanwhile, regional instability has exacerbated economic challenges. The ongoing war in Gaza and attacks on Red Sea shipping lanes by Yemen’s Houthi rebels—who claim to be targeting global trade in solidarity with Palestinians—have significantly impacted Egypt’s Suez Canal revenues.
According to official figures, revenue from the Suez Canal, a crucial source of foreign currency for Egypt, plunged by over 70% last year.