Egypt raises fuel prices
Up to 55% rise at the pump is part of reforms package to cut budget deficit
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.
Egypt first increased fuel prices in 2014 and again in November last year after floating the pound.