Egypt’s headline inflation slowed to 32.5% in April

Egypt’s annual urban consumer price inflation rate decreased to 32.5 percent in April from 33.3 percent in March, slowing slightly more than analysts had expected, data from the country’s statistics agency CAPMAS showed on Thursday.

Month-on-month, prices rose by 1.1 percent in April, up from 1.0 percent in March. Food prices declined in April by 0.9 percent, though they were 40.5 percent higher than a year ago.

A poll of 17 analysts had expected annual inflation to dip to a median 32.8 percent, continuing a slowing trend that started in September when inflation reached a peak of 38.0 percent.

The central bank has tightened its monetary policy, hiking interest rates by 600 basis on March 6, the same day it signed a $8 billion financial support package with the International Monetary Fund and let the currency plummet.

Egypt promised the IMF in the March agreement it would resume tightening if necessary to prevent further erosion of the purchasing power of households.

The government last month also increased the price of a range of petrol, diesel and other fuels, as part of a commitment made to the IMF.

Inflation has been elevated for the past year, driven largely by rapid growth in the money supply.

Meanwhile, Egypt’s non-oil private sector continued its contraction in April, with the S&P Global Purchasing Managers’ Index for the country edging down to 47.4 from 47.6 in March. This marks the 41st consecutive month below the 50.0 threshold, which separates growth from contraction.

The employment sub-index slipped to 49.7 in April from 50.8 in March, stated the rating agency.

However, the output sub-index climbed to 44.8 in April from 44.5 in March and the new orders index improved to 45.5 from 45.0. Business sentiment also improved, with the future output expectations index climbing to 55.3 in April from 52.2 in March.

Meanwhile, global ratings agency Fitch last week revised Egypt’s outlook to positive from stable.

The agency affirmed Egypt’s rating at ‘B-,’ citing reduced external financing risks and stronger foreign direct investment.

Foreign investors have poured billions of dollars into Egyptian treasury bills since the country announced the IMF loan program. After the investment in the country’s foreign portfolio and the support from the UAE, Egypt’s net foreign assets deficit shrank by $17.8 billion in March.

Fitch said that initial steps to contain off-budget spending should help to reduce public debt sustainability risks.