The consumer price inflation is projected to reach 10.9 percent by the end of the 2013 fiscal year and climb to 11.6 percent in 2014 as the Egyptian government implements subsidy cuts, according to International Monetary Fund's Regional Economic Outlook Update for the Middle East and Central Asia.
"Inflation is expected to rise in Egypt, Jordan, Morocco, and Tunisia, reflecting recent and planned subsidy cuts and, in some cases, pressure from monetization of fiscal deficits and supply shortages," states the report, released on Tuesday.
The IMF predicts that Egypt's budget deficit will shrink to 8.7 percent in 2014, after hitting 11.3 percent of GDP in 2013.
The Egyptian government has pledged to instill austerity measures in the form of tax reforms and spending cuts aimed at reining in the country's growing deficit and qualifying for a $4.8 billion IMF loan, though it is still in the process of hammering out a concrete reform plan with the Fund.
According to the report, the global lender, which recently reached staff level agreement on a US$1.75 billion Stand-By Arrangement with Tunisia, is "in discussions on a possible arrangement with Egypt."
Earlier this month, Investment Minister Yehia Hamed predicted the budget deficit in the current fiscal year would reach 11.5 percent of national output in the current fiscal year.
As whole, the report's outlook for the MENAP region, which in addition to Middle Eastern and North African countries includes Afghanistan and Pakistan, is quite bleak, with only "modest growth" anticipated across a region plagued by high unemployment.
Growth is predicted to inch up from an average of 2.7 percent to 3 percent among the region's oil importing countries, excluding Syria.
"Social, political, and economic conditions remain impaired, with continued social unrest, complex political transitions, and an economic environment characterized by modest global growth, high commodity prices, and weak domestic confidence" the report explains.