Egypt targets 5% inflation by 2026, government document says
A government document says that Egypt will aim to achieve price stability and lower inflation rates to 7% (±2%) by the end of 2024, and to 5% (±2%) by the end of 2026, while keeping it below 5% by 2030.
The document, prepared by the Information and Decision Support Center of the Cabinet, outlines the strategic directions of the Egyptian economy for the next presidential term (2024-2030). It expects inflationary pressures to ease from this year, with an average inflation rate of 9.2% during 2024-2028. It also calls for controlling the money supply and aligning it with the real GDP growth, to avoid inflationary pressures caused by excessive monetary expansion.
The document also confirms the government’s commitment to a flexible exchange rate policy, to improve the economy’s resilience to shocks and reduce the gap between the official and parallel exchange rates. The IMF projects that the Egyptian pound will average EGP 36.83 per dollar during 2024-2028, assuming that the current account deficit will be contained at 2.6% of GDP annually.
The Central Bank of Egypt (CBE) has been pursuing a tight monetary policy to rein in inflation, which reached 34.2% in December 2023. The CBE’s Monetary Policy Committee (MPC) has kept the key interest rates unchanged at 19.25% for deposits, 20.25% for lending, and 19.75% for the credit and discount rates and the bank’s main operation since September 2023.
The MPC has stressed that the interest rate path depends on expected inflation rather than current inflation and that it will use all available tools to reduce monthly inflation and achieve the announced targets.
Additionally, the document indicated that the government has adopted a national program to mobilize foreign exchange resources to enhance the solidity and flexibility of the Egyptian economy in the face of crises, with targeted revenues of around $300bn, representing nearly three times the current levels achieved from foreign exchange.
This will happen by raising the growth rate of the value of Egyptian exports by no less than 20% annually, enabling the Egyptian economy to reach an export target of approximately $145bn in 2030, and raising the growth rate of tourism revenues by 20% annually to reach $45bn. In addition to the growth in remittances from workers abroad by 10% annually to reach the target of $53bn, There would be an increase in direct foreign investments, including investment in real estate, by 10% annually to reach about $19bn, and Suez Canal revenues would increase by $4bn to 10% annually, reaching a target value of $26bn. Moreover, the growth rate of exports of outsourcing services would increase by 10% annually to reach a target of $13bn.
The document affirmed the state’s interest in reducing borrowing from abroad, in accordance with the application of micro- and macro-prudential policy tools, and harmonizing the maturity dates of assets and liabilities in foreign currency to achieve financial stability.
It added that the government will also work to utilize the opportunities offered by digital transformation in terms of continuing to develop the Egyptian financial sector, and increasing its value.
The document also confirmed that the government will continue its efforts to develop the Egyptian financial sector and raise the financial inclusion rate to 100% by 2030, and increase the number of digital financial wallets to about 80 million by 2030 to support inclusive economic growth.