In latest round of subsidy cuts, Egypt hikes fuel prices by up to 22%
The move was expected to further squeeze the country’s poor and middle class, which have seen their purchasing power shrink under the current reforms.Updated: Jul 05, 2019 20:11 IST
The Egyptian government hiked up fuel and cooking gas prices Friday in another round of subsidy cuts designed to overhaul the country’s ailing economy and meet the requirements for a large bailout from the International Monetary Fund.
The move was expected to further squeeze the country’s poor and middle class, which have seen their purchasing power shrink under the current reforms.
The new prices were announced in Egypt’s official Gazette late Thursday and came into effect Friday morning. The price of 92 octane gasoline increased by about 18 %, from 6.75 to 8 Egyptian pounds per litre. Eighty octane gas rose by nearly 22 %, from 5.5 to 6.75 Egyptian pounds per litre.
Prices for cooking gas increased from 100 to 130 Egyptian pounds (from $6 to $7.87) per cylinder for household use.
In 2016, Egypt had agreed to slash a range of energy subsidies and economic reforms in exchange for the $12 billion IMF loan.
The reforms included floating the currency, substantial cuts in state subsidies on basic goods, and introducing a wide range of new taxes. As Egypt was implementing the IMF-dictated reforms, the inflation rate reached an all-level high of nearly 30 % in 2017 before going down to 14.4 % in 2018, according to the government’s official figures.
In May, the IMF staff agreed to disburse the final $2 billion portion of the loan, a decision that still awaits the approval of its executive board. At the time, the IMF staff had hailed “the ambitious home-grown reform program.”
“The authorities’ efforts have been successful in achieving macroeconomic stabilization, a recovery in growth, and an improvement in the business climate,” the IMF staff said in a statement.
This is the fourth time Egypt has raised fuel prices since it signed off on the deal with the IMF. The government says the new fuel subsidy cuts will allow it to save nearly 36 billion pounds ($2.1 billion) that could be allocated to health and education investments.
In the leadup to the announcement of new prices, the government launched a robust media campaign on radio stations and television channels to market the anticipated move. The government ads claimed that it was not really the needy who are benefiting from fuel subsidies but the rich who could afford buying cars. However, the campaign failed to convince many critics who still believe the move will lead to the impoverishment of more Egyptians.
“When you raise fuel prices, this means that transportation costs will go up, hence all goods will become more expensive because their prices are factored on transportation cost,” said Maye Kabil, an economic analyst with the Egyptian Initiative for Personal Rights. “People’s incomes are already insufficient.”
The government also raised the prices of diesel, which is the main fuel used to transport goods and commuters, from 5.5 to 6.75 Egyptian pounds per liter — a 22% increase.
According to the government’s latest official figures, nearly 28 % of the population lived below the poverty line as of 2015.
First Published: Jul 05, 2019 19:54 IST