Egypt’s economic rebound has begun to lose steam as inflation trends reverse course after months of improvement. Although the North African nation recorded strong growth compared to the previous year, recent data shows inflation climbing again, raising concerns about the sustainability of its recovery. In February, inflation dropped sharply to 12.8% from 24% in January—its lowest level since 2022—driven largely by the resolution of a prolonged foreign exchange shortage that had fueled a parallel dollar market. To stabilize finances, authorities allowed the Egyptian pound to depreciate over 35% against the U.S. dollar in 2024 and hiked interest rates to historic highs in March. By May 2025, the International Monetary Fund (IMF) acknowledged Egypt’s progress toward macroeconomic stability but urged broader tax reforms to strengthen fiscal resilience. At that time, inflation stood at 16.8%, up from 13.9% the prior month. A downward trend resumed in the summer, with inflation falling to 11.7% in September from 13.9% in July, leading Prime Minister Mostafa Madbouly to declare that long-standing economic difficulties, including debt servicing pressures, were largely behind the country. However, October brought a reversal: inflation rose to 12.5% from 11.7%, primarily due to higher fuel prices. Meanwhile, the central bank has cut borrowing costs by a cumulative 625 basis points in 2025, including a reduction in early October, aiming to ease debt burdens and encourage investment. Despite these efforts, the benchmark interest rate remains elevated at 21%, continuing to attract foreign investors to Egypt’s bond market.
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Egypt’s economic recovery loses momentum as its inflation figures creep back up
This sort of fluctuation is not necessarily reflective of the North African country’s economy, given its steady recovery since the year began. n nThe Egyptian economy has recorded significant growth overall, compared to the previous year, and as a result, its inflation figures have been consistent since the midpoint of the year. n nThe country saw its inflation figures dip by half in February, marking its lowest levels since 2022, as its inflation rate fell to 12.8% from 24% in January. n nADVERTISEMENT n nThe decline was the result of a year-long foreign currency shortage, which created an underground market for dollars before finally subsiding. n nIn 2024, officials let the country’s currency (the Egyptian pound) fall by more than 35% against the dollar and raised interest rates to a record high in March to ensure outside finances. n nBy May 2025, the International Monetary Fund (IMF) concluded that Egypt merely needs to broaden its revenue base to reinforce the progress it has made toward macroeconomic stability, following its visit to the North African country. n nAt the time, Egypt’s inflation had risen to 16.8%, from 13.9% in April. n nReuters n nADVERTISEMENT n nBy September, the Egyptian Prime Minister, Mostafa Madbouly, asserted that Egypt’s nagging economic challenges, particularly concerning debt repayment, had become a thing of the past. n nThe inflation figure for September was 11.7%, compared to 12% in August, which had come down from 13.9% in July, indicating a steady decline. n nHowever, the October rate tells a different story, as the figures moved from 11.7% the month before to 12.5%, as a result of an increase in fuel prices. n nAs seen on Bloomberg, Egypt’s central bank has steadily lowered borrowing costs in 2025, including in early October, by a total of 625 basis points, in an effort to lower debt-servicing costs and stimulate investment, which is critical to economic growth. n nThe key interest rate remains high, at 21%, attracting foreign portfolio investors to the local debt market.