Egypt’s urban inflation rate declined slightly for the fourth month in a row, reaching 24% in January, according to data from the Central Agency for Public Mobilization and Statistics (CAPMAS) released on Monday.
January’s inflation figure represents a marginal decrease from the 24.1% recorded in December 2024. On an annual basis, inflation fell by 0.8 percentage points compared to January 2023, when it stood at 24.8%.
Prices remained higher across all sectors compared to the same period last year. Food and beverage prices rose by 20.2%, transport costs surged by 33.6%, and entertainment expenses increased by 48% year-on-year.
Despite the recent slowdown, inflationary pressures persist. Monthly inflation rose by 1.6% in January after remaining flat in December. Food and beverage prices saw a 2.1% increase month-on-month, while healthcare services recorded a 4.6% jump.
The northern African nation’s high inflation stems from both external and domestic factors. The war in Ukraine, which began in 2022, disrupted global supply chains and led to large capital outflows from Egypt’s treasury markets. As foreign investors withdrew billions of dollars, the Egyptian pound weakened, making imports more expensive.
Food security remains a major issue, with Egypt relying on Russia and Ukraine for 80% of its wheat imports. The conflict caused wheat prices to double, raising bread costs, while global energy price hikes further increased production and transportation expenses.
Domestically, inflation has been exacerbated by rapid monetary expansion. In 2024, Egypt’s M2 money supply grew by 31.07%, the highest on record. This excess liquidity, combined with a weakened currency, has fueled inflationary pressures and reduced consumer purchasing power.
The cumulative effect of these factors has been a sharp increase in inflation, which peaked at 38% in September 2023.
The Central Bank of Egypt (CBE) has raised interest rates by more than 1,000 basis points since early 2022 to tighten liquidity and support the pound. Additionally, the government has sought financial assistance from international lenders, such as the International Monetary Fund (IMF), while working to attract foreign investment and boost local production.
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In a recent statement, the CBE acknowledged the decline in inflation, noting that "with the gradual easing of previous shocks, inflationary pressures continued to subside, as annual headline and core inflation edged downward for the fifth consecutive month." The bank added that "the gradual unwinding of food inflation along with the improvement of inflation expectations suggest that inflation is currently on a downward trajectory."
