Egyptians get some relief from soaring prices as inflation eases

Consumer prices decline annually on month for the first time since March as the country prepares to weaken the Egyptian pound ahead of its hoped for loan from the IMF.

Egypt’s annual inflation rate dropped for the first time since March, offering a much needed respite from soaring prices as the country gears up for weakening its currency to secure a US$12 billion loan from the IMF.

Prices in urban parts of Egypt rose by 14.1 per cent in September compared with a year earlier, according to data from the state-run statistics agency Capmas. The rate was 15.5 per cent in August, the highest in at least seven years. Food and beverage prices, which account for the largest component of the basket of goods and services, climbed 14.8 per cent in September versus 19.3 in August.

The September inflation rate rose 1.2 per cent month-on-month, compared to 1.9 per cent in August.

Some economists expect the inflation rate to rise to as much as 20 per cent by year-end, as the government implements reforms including devaluing the currency and curbing subsidies in a bid to trim one of the Mena region’s’s highest deficits. Weakening the currency is key to helping ending a foreign crunch crunch that has hammered business activity and kept foreign investors at bay.

The concern has been that reform will send prices rocketing, squeezing an already struggling lower income bracket in the nation of nearly 92 million. Officials have been urging food companies to cut prices to ease any potential shock to consumers, particularly after the introduction of a value-added tax last month. The president Abdel Fattah El Sisi has also ordered the government to make available necessary staples to guard against shortages and price gouging by traders.

The moves are part of reforms to which the government has committed in order to secure the IMF loan.

Follow The National's Business section on Twitter