CAIRO (AP) — The Egyptian government hiked up fuel and cooking gas prices on Friday, in another round of subsidy cuts designed to overhaul the country’s ailing economy and meet the requirements of a large bailout from the International Monetary Fund.
The move is expected to further squeeze the poor and the 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 the following morning. The price of ninety-two octane gasoline increased by about 18 percent, from 6.75 to 8 Egyptian pounds per liter. Eighty octane gas rose by nearly 22 percent, from 5.5 to 6.75 Egyptian pounds per liter.
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 percent in 2017 before going down to 14.4 percent in 2018, according to the government’s official figures.
In May, the IMF staff agreed to disburse the final $2 billion tranche 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.
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 percent increase.