The other lesson Egypt taught Argentina: Halving 30% annual inflation in two years

Beyond its football performance, Egypt offers Argentina a compelling economic lesson: a successful strategy to halve annual inflation from over 30% in just two years. This transformation, achieved under an International Monetary Fund (IMF) program, saw Egypt's inflation rate drop from a high of 33.3% to 14.8%.

In March 2024, the Egyptian government initiated reforms aimed at liberalizing its currency market and unifying official and parallel exchange rates. The Central Bank of Egypt also raised interest rates by 800 basis points to curb portfolio dollarization and combat inflation stemming from the currency liberalization. Concurrently, Egypt implemented fiscal policies to strengthen public finances, achieving a primary surplus of 4.4% of GDP.

Initially, Egypt's inflation rose from 24.4% to 33.3% following these measures. However, it began to decline, reaching 20.4% by the end of last year. The IMF projects inflation to be 13.2% this year, with the latest data for May showing it at 12.3%. While Egypt's fiscal position shows a primary surplus, its overall financial deficit is projected to reach 12% of GDP by year-end. In comparison, Argentina's fiscal position appears more robust.

The external front presents a different picture. While Argentina anticipates a positive external balance this year, Egypt's is expected to show a deficit of four points of GDP, partly due to the impact of the war in the Middle East on oil prices. Egypt's interest rates remain positive, its exchange rate is gradually moving towards a float, and its country risk has fallen to 335 basis points. The IMF estimates Egypt could reach single-digit inflation by the end of 2027, a notably rapid disinflation process compared to other nations.