Egypt’s PM defends economic measures

Fuel subsidies cut, gasoline prices hiked

CAIRO:

Egypt’s prime minister yesterday tried to reassure anxious Egyptians after the Central Bank’s unprecedented decision the previous day to devalue the national currency by 48 percent before allowing it to float.

Sherif Ismail pledged that steps would also be taken toward “improving the citizens’ living conditions” and insisted that while past measures were only temporary “pain reliefs,” the latest drastic moves were part of a comprehensive reform program.

Thursday’s devaluation of the pound was meant to meet conditions set by the International Monetary Fund for a much-needed $12 billion bailout. Egypt also announced cuts in fuel subsidies, along with a hike in gasoline prices between 30 percent and 46.8 percent.

The surge in fuel price triggered concerns of a far-reaching knock-on effect, with similar increases in food and transportation prices. Word of Thursday’s hikes was leaked late at night, sparking a rush by motorists to gas stations, where long lines of vehicles formed across much of the country.

Ismail said the measures are necessary and that “it’s our destiny to take action in the face of the current economic situation.” The government aims to achieve a growth rate no less than 6 percent, he said, compared the current rate of around 4.3 percent. It also seeks to decrease the budget deficit from 12 to 10 percent, Ismail added.

He warned that public debt is inching closer to 100 percent of the GDP, adding that the way forward is to attract foreign investment by improving investment conditions to provide more job opportunities and increase exports. Egypt currently imports a third of its needs in goods. “We want to move forward,” he said, adding that economic reform will go hand-in-hand with social protection, including tighter control over food prices. “Reform comes at a cost,” he said. “At the end, it will serve the citizens’ interest.” Ismail cited 1977 bread riots over austerity measures introduced by former Egyptian President Anwar Sadat, who deployed the army to put down riots against lifting of subsides. Sadat ended up cancelling the austerity measures. This, the prime minister said, led to an accumulation of budget deficits since subsidies eat up a big chunk of the state budget. —AP