Inflation Eases in Egypt During September

The annual urban consumer prices inflation in Egypt eased in September to 14.1% from 15.5% or a high of eight years during August, said CAPMAS the official statistics agency on Monday.

In August, headline inflation surged, raising the expectations that the Egyptian central bank raise interest raise September 22. However, the country’s central bank kept rates where they were citing transitory factors, which pushed costs up.

The drop during September is the first for the urban measure dating back to March. Increases in inflation have been steady since April, while economists are expecting it to continue increasing as the country implements a complete overhaul that includes cuts in subsidies and the devaluation of its pound.

Egypt has come under more pressure to give its economy a boost and to curb inflation to avoid backlash from the public.

Economists said the Egyptian pound, which is kept at 8.78 per U.S. dollar, would need to be devalued prior to the end of 2016, driving up prices even more given the dependence Egypt has on importing goods.

Egypt holds an agreement with the staff of the International Monetary Fund over a loan program of $12 billion but must still get final approval from the board of the IMF.

Christine Lagarde the chief of the IMF said this week that Egypt must take action on subsidies and exchange rates before the board of the IMF could give formal approval of the loan.

Looking forward, despite a dip in September, it is expected that inflation will increase soon, said one researcher on Monday.

This is due to authorities coming closer to an agreement with IMF and one key lending condition will be the shift to a more flexible rate of exchange, said one economist.

He predicts the pound would weaken by 25% versus the dollar by 2017 year-end, driving prices higher. The number of foreign tourists visiting Egypt dropped 45% during August in comparison to the same month one year ago.

Experts believe that tourism could increase in the short term, following an introduction of new security systems in the airport and a resumption of all flights from some countries in Europe to Sharm el Sheikh as well as other resorts across Egypt.

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