Egypt’s central bank is expected to resume monetary easing after last month’s pause, as the country works to curb inflation that hit 38% in 2023. Economist Aathira Prasad says a Fed rate cut would support Egypt’s efforts to stabilize its economy following last year’s bailout.

Cairo

Egypt's inflation rate has decreased significantly from a high of 38 percent in 2023 to 13.9 percent, creating conditions favorable for the central bank to consider a rate cut. Analysts expect a 100 basis point reduction, with the possibility of rates dropping to 20-21 percent by year-end, contingent on global economic developments such as US Federal Reserve policy.

A Fed rate cut would likely lower Egypt's external financing costs and support its economic recovery, especially as the country continues gradual fiscal reforms and benefits from increased tourism, manufacturing, and non-oil exports. However, slow progress in privatizing state-owned assets and meeting IMF reform expectations remain risks to the outlook.

Prasad: Fed rate cut could aid Egypt’s economic recovery

That inflation backdrop is key here because we went from as high as 38 percent back in 2023 to the latest figure showing 13.9 percent in July of 2025. So does that open the door up to further easing out of the central bank. And if it does what are you expecting today. I think so. We're basically looking for 100 basis point reduction in the rate which I think largely the market has been expecting that given the post that you had unexpectedly the last time. So I think the circumstances are right for the central bank to go ahead with the rate cut. You've had falling inflation anyways. You've had better liquidity in the market. FX liquidity. You've had certain numbers that have come out on the macro side which are quite promising. So all in all I think there is leeway for the central bank to go ahead and resume its reduction in rates. And we expect this to continue. We are looking for maybe about rates to come down to 20 21 percent by the end of the year. Of course that's depending on various factors including what happens on the global level. If you have a better situation with the Fed the ECB everyone going as expected. So if the Fed to start resume their own cutting cycle and go for a cut in September what sort of knock on effects would that have on Egypt. Well there. Egypt is not pegged to the dollar like the GCC but still there would be benefits for them. You would be looking at better external financing rates. They have a lot of debt to serve debt servicing. So that would become lower as well. In general they would be in a much competitive very competitive basis once the Fed starts cutting rates. So it would work to the benefit of Egypt in a bit. So in a way the Fed cut would be beneficial for the Egyptian economy. The Egyptian economy has had multiple prongs at play. You've got central bank but of course you have the reform process. You've had the flexibility of the currency. But all of that goes hand in hand with the fact that Egypt are actually in an IMF program. They received the bailouts in the case of the UAE. Some financial assistance or investments. Yes. How how is the reform momentum right now. But they are taking it slow. It's a gradual approach. So what you've seen is some beneficial efforts in terms of the fiscal reforms basically on the efficiency of tax collection and so on. And that you're seeing the results as well in the tax revenues hiking up and so on. But there are other parts of the reforms which have been quite slow in terms of the state owned assets privatization that's taken its time. It has been very very slow because you hear these statements saying that it's going to happen next quarter or by the end of the year. But you don't really see them come through at the rate at which you expect. And I think that's one of the drawbacks that you've seen in terms of where IMF expects the reforms to go. But it has not happened in pace with what you say. That is the biggest risk right now to the Egyptian outlook. For now they seem to be doing well. I mean we have to consider it on what was happening in Egypt a few years back from that dismal picture. What you're seeing right now is surging tourism revenue. You're seeing manufacturing at record highs if you're looking at the latest print that's come out in industrial production. You've had non-oil exports increasing as well. And in general there seems to be a level of confidence that exists now that wasn't there before. So in that front I think Egypt is in a much better place. And the reviews are scheduled to happen again. I think they've combined the next two reviews to happen later this year. And you have the central bank governor staying on to see it through. That's also. Yeah that's also a positive positive sign. OK. Let me broaden it out and ask about the region as a whole. I can't believe we're already September. It's difficult to believe in September. How has the region weathered the whole uncertainties around global trade tariffs. And of course this region was somewhat spared from from the higher levels of reciprocal tariffs but still not immune to a potential global slowdown. I think the region has done quite well. They've taken the right steps in terms of you know U.S. is a strong partner. If you look at the history and everything that's been happening. But they're also keen to open up to the new parts of the world that is emerging. So you have links with China. You've links with India. All of those things are happening in parallel with whatever existing relationship they have with the U.S. and the Western world. And the focus has really been on enhancing the non oil sector. So if you look at the non oil growth rates in any of the GCC countries they are quite strong and it's becoming a more resilient story of being not just dependent on how oil prices are going to affect your growth but it's what are the sectors can we invest in and what are the things that we need to put in place so that enough firms come and locate here in order to boost the non oil sector growth. So far it seems to be working.

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