Egypt raises fuel prices

Up to 55% rise at the pump is part of re­forms pack­age to cut bud­get deficit

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Egypt raised fuel prices by up to 55 per cent, as the gov­ern­ment pushes ahead with re­forms to cut the bud­get deficit and re­vive the econ­omy that is putting pressure on house­holds.

The price for a litre of 80 oc­tane petrol or diesel, the most com­monly used fuel cat­e­gory, rose to 3.65 pounds (74 fils) from 2.35 pounds, the cabi­net said in a state­ment yes­ter­day, while 92 oc­tane fuel in­creased to 5 pounds from 3.5 pounds per litre. Bu­tane can­is­ters, a sta­ple in house­holds for cook­ing, dou­bled to 30 pounds. The move, while ex­pected ahead of the start of the new fis­cal year that be­gins to­mor­row, comes at a del­i­cate time for a gov­ern­ment as it tries to balance the books but wary of un­rest among Egypt’s 93-mil­lion pop­u­la­tion – about half of whom live on or near the poverty line. The Novem­ber de­ci­sion to float the pound caused in­fla­tion to soar above 30 per cent, although it also helped to se­cure a $12 bil­lion In­ter­na­tional Mon­e­tary Fund loan seen as vi­tal to boost in­vestor con­fi­dence. Egypt’s econ­omy has been strug­gling since a 2011 upris­ing drove for­eign in­vestors and tourists away, but the gov­ern­ment hopes the IMF pro­gramme will put it back on the road to re­cov­ery.

Food and en­ergy sub­si­dies tra­di­tion­ally eat up about quar­ter of state spend­ing, but aus­ter­ity re­forms are po­lit­i­cally sen­si­tive for president Ab­del Fat­tah El Sisi. The gov­ern­ment first in­creased fuel prices in 2014 and again in Novem­ber last year af­ter float­ing the pound.

Egypt’s petroleum min­is­ter Tarek El Molla said the total amount of sub­si­dies for petroleum prod­ucts in 2017-2018 would fall to 110 bil­lion Egyp­tian pounds from 145 bil­lion.

“The gov­ern­ment is get­ting all the painful mea­sures done” this fis­cal year, said Re­ham El De­soki, se­nior econ­o­mist at Dubai’s Arqaam Cap­i­tal.

“That’s prob­a­bly the gov­ern­ment’s strat­egy. Now, the worst is prob­a­bly be­hind us,” she said, adding that the com­ing fis­cal year would be a “fresh start, with de­creas­ing in­fla­tion and in­ter­est rates”.

President Sisi has said that the re­forms, while painful, are nec­es­sary and that the coun­try can’t af­ford to hold off any longer.

Prime min­is­ter Sherif Is­mail said yes­ter­day that the gov­ern­ment would seek to shield lower-in­come fam­i­lies from the ef­fect of the higher fuel prices.

“The move was al­ready fac­tored in house­holds’ and busi­nesses’ ex­pec­ta­tions, which may soften its psy­cho­log­i­cal im­pact,” Ms El De­soki said. Even so, the in­fla­tion rate could re­bound to the mid-30s in the short term be­fore drop­ping again in Novem­ber, she said.

Egypt’s an­nual in­fla­tion rate eased slightly to 29.7 per cent in May, while the monthly price in­crease held steady at 1.7 per cent.

Khaled El­fiqi / EPA

Egypt first in­creased fuel prices in 2014 and again in Novem­ber last year af­ter float­ing the pound.

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