Egyptian Finance Minister says taming inflation is top priority

Customers shop at Al Azhar food market Cairo. Bloomberg

Egypt’s Finance Minister, Mohamed Maait, on Tuesday said taming inflation is the country’s biggest priority after Cairo received an $8 billion bailout from the International Monetary Fund.

Inflation in Egypt slowed to 33.3 per cent last month from 35.7 per cent in February, but this is still well above the central bank’s long-term target of about 7 per cent.

Mr Maait also expressed hope that interest rates, which were raised by 600 basis points last month, will eventually come down.

Aggressively raising interest rates and floating the Egyptian pound were two key demands Egypt had to meet for the IMF to increase its $3 billion loan to $8 billion.

The Egyptian pound plunged after the central bank’s decision to float its currency. It closed on Tuesday at 48.50 against the US dollar.

During an event at IMF headquarters in Washington, Mr Maait said the adjustments to Egypt’s monetary and fiscal policies must “be lasting”.

He said “we need at least six months” to assure the private sector and civilians that “we are on the right track”.

“The flexible exchange rate will continue to assure them that the private sector will lead, assure them that we will contain our public investment and also inflation, because the citizens have suffered greatly from that high inflation,” Mr Maait said.

Egypt’s economy has faced many challenges over the years, including austerity, the Covid-19 pandemic, and the wars in Ukraine and Gaza.

Mr Maait said revenue from the Suez Canal, where trade has been disrupted because of the Yemeni Houthis’ attacks in the Red Sea, has dropped by 60 per cent.

Tourism, another major source revenue for Egypt, has also been harmed, he said.

“So this is a whole situation in the Middle East is challenging, and is affecting Egypt negatively on some of the economic sector,” Mr Maait said.