IMF Predicts That Egypt’s Inflation Will Fall to 16% by June 2025

The International Monetary Fund (IMF) has projected a gradual reduction in Egypt’s inflation rate, expecting it to reach 16% by the end of the 2024-2025 fiscal year, a positive development outlined in the IMF's Regional Economic Outlook report. This anticipated decline is largely attributed to base effects, as previous inflation highs create a lower comparative threshold, and to expected policy tightening measures that aim to stabilise the economy.

Egypt’s inflation has surged recently, with early projections from the IMF and World Bank suggesting it would peak at around 33% in 2023 before starting to decline. September saw a rise in the annual headline inflation to 26%, an unexpected shift following a five-month trend of decreases. However, core inflation, which excludes volatile items, dropped slightly by 0.1% that month, pointing to some stability in underlying price pressures.

To combat inflation in the long term, the Central Bank of Egypt (CBE) has set ambitious targets: 7% inflation (plus or minus 2%) by the fourth quarter of 2024, followed by a further reduction to 5% (plus or minus 2%) by the end of 2026. Some external forecasts also show optimism. Fitch, for instance, projects inflation to drop to 12.5% by the close of FY 2025.

For context, inflation rates among MENA oil-exporting countries are projected to average 8.8% in FY 2024-2025, and 8.3% the following year. Egypt’s higher figures highlight the unique pressures the country faces as it pursues stabilisation.

On the fiscal front, Egypt is working toward debt reduction, with the IMF projecting a 6% decrease in the debt-to-GDP ratio for FY 2024-2025. This target is supported by government fiscal consolidation efforts and strategic revenue allocation, including funds from the Ras El-Hekma deal specifically earmarked for debt reduction.

Looking ahead, the IMF forecasts an average economic growth rate of around 5% for Egypt in the medium term, a goal that relies on continued economic reforms and an easing of regional conflicts that affect trade routes and investor confidence.