Ahmed Kamel – Egypt Daily News
Egypt’s inflation rate accelerated in February as mounting economic pressures and regional geopolitical tensions added new challenges to the country’s fragile economic recovery.
Annual inflation in Egypt’s urban areas rose to 13.4 percent in February, up from 11.9 percent in January, according to data released Tuesday by the Central Agency for Public Mobilization and Statistics. The increase came just as tensions in the Middle East escalated following the outbreak of war involving the United States, Israel and Iran, developments that analysts say could place additional pressure on prices through higher energy costs, shipping disruptions and exchange rate volatility.
The latest data shows that inflationary pressures were driven by several key sectors. The cost of housing, water, electricity, gas and fuel surged by 24.5 percent on an annual basis, largely due to higher rents and increased electricity and gas prices. Transportation costs also rose sharply, increasing by 20.3 percent compared with a year earlier, reflecting higher transportation service fees and the cost of purchasing vehicles.
Food prices also contributed significantly to the rise in inflation. Vegetable prices jumped by around 19.9 percent year-on-year, alongside increases in fish and beverage prices. Food consumption typically rises during the holy month of Ramadan, which can add seasonal pressure on food markets.
On a monthly basis, inflation also accelerated, rising to 2.8 percent in February compared with 1.2 percent in January.
President Abdel Fattah el-Sisi previously warned that the conflict involving Iran, which erupted in late February, would likely lead to higher prices and economic pressures across the region.
Currency pressures and fuel price increases
The Egyptian pound has lost nearly 10 percent of its value against the US dollar since the outbreak of the conflict, reaching record lows amid capital outflows from Egypt’s local treasury bill market. Foreign investors have reportedly withdrawn about $2.63 billion from the secondary market since the escalation began.
The weaker currency increases the cost of imports, adding further inflationary pressure in a country that relies heavily on imported fuel, food and industrial inputs.
At the same time, the government has raised fuel and gas prices by between 14 percent and 30 percent in the latest adjustment, marking the third increase within a year. The move is expected to ripple through the economy by raising transportation and production costs, which could ultimately lead to higher prices for goods and services.
Egypt is a net importer of fuel and relies heavily on purchasing liquefied natural gas from international markets to bridge the gap between domestic production and demand. Global oil prices have climbed since the outbreak of the war with Iran, with Brent crude oil reaching about $93 per barrel after briefly approaching $120 per barrel earlier this week.
External pressures on foreign currency revenues
The regional escalation may also affect key sources of foreign currency for Egypt. Early indicators suggest that the tourism sector could face slower bookings from some international markets due to security concerns.
Shipping companies have also begun avoiding the Suez Canal amid regional tensions, potentially delaying the recovery of revenues from one of Egypt’s most important sources of foreign currency.
Despite the recent increase, inflation remains well below the historic peak recorded in September 2023, when it reached about 38 percent before beginning a gradual decline after Egypt secured a financial rescue package in March 2024 with the International Monetary Fund.
The support package and accompanying economic reforms helped stabilize macroeconomic conditions, ease inflationary pressures and strengthen Egypt’s external financial position.
Outlook depends on duration of regional conflict
Analysts say the ultimate economic impact on Egypt will depend largely on how long the regional conflict continues and how far it spreads.
If tensions persist, higher import costs and weaker foreign currency inflows from tourism, remittances and the Suez Canal could place additional strain on Egypt’s external balances and complicate economic policy decisions.
Many investment banks expect the Central Bank of Egypt to adopt a cautious approach at its upcoming policy meeting, with most forecasts suggesting that interest rates will likely remain unchanged or possibly rise if inflationary pressures intensify.
The Egyptian central bank had been able to cut interest rates significantly since April 2025 as inflation eased and economic activity began to recover. However, the renewed inflationary pressures linked to regional instability may make the path of monetary policy more sensitive in the coming months.
