Economic Reforms in Egypt and Slowing inflation, What Next for the Central Bank?


Friday, August 09, 2019   / 05:00PM / United Capital Research / Header Image Credit: Getty Images


We recall that Egypt signed an economic reform program with the IMF about 3-years ago in a bid to salvage the economy from the throes of the economic and political crisis. The IMF program came with requirements to implement some reforms which included the introduction of value-added taxes, cuts to energy subsidies and a currency devaluation. 

With the medium to long term gains overshadowing short-term pains, the country holistically implemented all the above policies. Today, the benefits of the program range from a decline in the unemployment rate which fell to 7.5% in Q2-19 (vs 12.6% in Q3-16, pre-IMF reforms) to slimmer budget deficits as well as a stronger Egyptian pound (+8.3% YTD). 

At the start of the fiscal year in Jul-19, Egypt received the final tranche of loan from the IMF and announced a fresh round of subsidy removal which created some fears of an uptick in inflation. However, according to the Jul-19 inflation report released yesterday, consumer prices in the urban parts of Egypt slowed to its lowest in almost four years, to 8.7% from 9.4% in Jun-19. Also, the core inflation sub-index fell to 5.9% from 6.4% in Jun-19. The high base effect from the prior year drove this as well as the success of government efforts to contain food prices. Meanwhile, with inflation already within the Central Bank of Egypt's target (9.0% +/-3ppts), we expect the Egyptian monetary policy committee to take a more accommodative stance as it gets ready to meet by the end of the month.


Top African Stories

  • Egypt to auction one-year euro-denominated t-bill on Aug 19: Egypt will auction a one-year Euro-denominated treasury bill worth 610 million euros on Aug. 19, the central bank said on Thursday. Reuters 

  • AFRICA-FX-Zambian currency seen bearish, Nigeria, Kenya, Uganda's stable: Zambia’s currency is likely to come under pressure next week as those of Nigeria, Kenya and Uganda hold steady. Reuters 

  • African telecoms group MTN says divestment plan on track after first-half sales: MTN Group Ltd is on track to meet a divestment target set in March after raising $140 million from asset sales that will slim down Africa’s largest mobile phone operator and refocus it on high-growth markets. Reuters 

  • Congo copper output rises 12.5% in Jan-June: Copper production in Democratic Republic of Congo rose 12.5% in the first half of the year from a year earlier to 672,272 tones, according to Central Bank figures released on Thursday.Reuters 

  • Standard Bank’s expansion in some of Africa’s fastest-growing economies pays off: South African lender Standard Bank shrugged off the impact of a faltering economy in its home market as its extensive operations across the continent helped the company to a 5% increase in first-half profit.CNBC 

  • Egyptian blue chips surge on inflation beat, robust earnings: Egyptian blue-chip stocks had their strongest day in nearly six months on Thursday as better-than-expected July inflation data and a host of strong corporate earnings buoyed investors ahead of a three-day religious holiday starting Sunday. Reuters  


Looking Forward


Jul-19 (CPI) Inflation - August 12th



Monetary Policy Decision - August 22nd



Jul-19 (CPI) Inflation - August 14th



Q2-19 Unemployment Report - August 10th



Jul-19 (CPI) Inflation - August 16th



Jul-19 (CPI) Inflation - August 16th 



Jul-19 (CPI) Inflation - August 12th 


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