Egypt’s annual inflation has recorded a decrease for the fourth month in a row, standing at 27.5 per cent in June and down from 28.1 per cent in May. This is the lowest reading since January 2023.

A closer look at the breakdown of the inflation figures shows a 32 per cent year-on-year increase in food and beverage inflation due to the 300 per cent increase in the price of subsidised bread.

However, inflation in other foods eased in June. Food and beverage inflation hit record highs nearing 70 per cent by the end of 2023.

The latest drop in inflation came in tandem with the overhaul of the government.

Upon forming his new cabinet, Prime Minister Mustafa Madbouli said that controlling prices was at the top of the government’s agenda. The prices of most strategic commodities have decreased since the announcement, according to websites tracing the direction of prices as well as the Cabinet’s website.

Staples such as rice, beans, pasta, and lentils have all seen price reductions.

Madbouli held a meeting on Monday to review efforts to reduce commodity prices attended by Ahmed Al-Wakil, president of the General Federation of Chambers of Commerce, and Mohamed Elsweidy, head of the Federation of Egyptian Industries.

During the meeting, Madbouli lauded the cooperation between the two federations to control market prices. He added that the government’s success, in cooperation with the Central Bank of Egypt (CBE), in controlling the exchange rate and providing production requirements for factories has increased the supply of goods in the market, pointing out that regulatory authorities have also played a part in controlling prices.

Earlier, Al-Wakil noted on TV that given the economic changes seen since 2022, it would not be fair to compare prices to what they had been two years ago.

He also referred to the ongoing initiative to reduce prices, saying that government policies play a crucial role in securing enough commodities. He stressed that demand for products is now lower than supply.

Hazem Al-Menoufi, a member of the Foodstuffs Division at the Federation of Chambers of Commerce in Alexandria, told Al-Ahram Weekly that food prices have decreased and stabilised during the last six weeks.

He noted that despite the availability of goods in the market demand was much lower than supply, sometimes bordering on stagnation.

Following the Eid Al-Adha holiday, the prices of poultry saw a marked decrease, with a kg of chicken dropping by LE25, chicken fillet by LE40, and a carton of eggs by LE30.

Tharwat Al-Zeini, vice-president of the Poultry Producers Federation, said the high temperatures and power outages in Egypt have had a negative impact on the poultry sector, leading to the deaths of many birds.

Over 30,000 farms have been affected by power outages, he added.

Al-Zeini noted that small breeders cannot afford electric generators for their farms, and frequent heat waves in the summer adversely affect poultry. The optimal temperature range for poultry is between 22 and 25 degrees Celsius, a level that cannot be reached even by air coolers. Temperatures since May have been between 35 and 42 degrees.

Sayed Abdel-Aziz, head of the Poultry Division at the Federation of Chambers of Commerce, warned that the recent price declines might lead to a further reduction in the number of poultry and egg producers. This could result in an increase in demand, potentially causing another surge in prices, he said.

He added that the sector is still reeling from the 2022 crisis, which saw 40 per cent of production capacity exit the market due to fluctuating feed prices, a capacity that has not yet been restored despite the stabilisation of the dollar exchange rate.

Abdel-Aziz warned that another week of such low prices might lead the poultry sector to lose an additional 25 per cent of its capacity.

To overcome this challenge, Abdel-Aziz suggested reviving the poultry exchange that would announce weekly pricing for the sector, including the prices of chicks, eggs, and birds. The official price announced by the exchange should be binding, allowing a margin of profit of no more than 20 per cent for sellers, he added.

Relying solely on supply and demand mechanisms, which currently operate without oversight, leads to significant gains for a small group of sellers at the expense of small and medium-sized producers, potentially driving them out of the market, Abdel-Aziz stressed.

Not all commodities have seen price reductions, however. Meat prices have increased by at least LE20 at slaughterhouses, Said Zaghloul, a member of the Butchers Division in the Giza Chamber of Commerce, told the Weekly.

Meat prices also vary from one district and city to another, he added.

Zaghloul attributed the rise in meat prices to several factors. Firstly, following the Eid Al-Adha season not all butchers have resumed their work. Additionally, there is a replacement period needed to replenish stock. For example, if a butcher had 100 calves and slaughtered 70 during the Eid, he would need time to replace the missing stock, he said.

He expected meat prices to stabilise once this replacement period ends and all butchers return to work.

The London-based consultancy Capital Economics stressed that “any near-term bump in the inflation profile in Egypt will prove small and short-lived, and the inflation rate will slow back toward the Central Bank’s target range by early 2025.”

The CBE’s target for inflation is set at seven per cent (±2 per cent) in the fourth quarter of 2024 and five per cent (±2 per cent) in the fourth quarter of 2026.

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* A version of this article appears in print in the 18 July, 2024 edition of Al-Ahram Weekly