Egypt raises fuel prices by up to 50 percent under IMF deal

[DJKeefy]

June 29 2017 Egypt hiked fuel prices by up to 50 percent to help meet the terms of a $12 billion IMF loan deal, a sharper rise than expected by many struggling with soaring living costs and a further test of President Abdel Fattah al-Sisi's popularity.

Fuel price increases had been widely anticipated as part of Egypt's loan accord with the International Monetary Fund and Thursday's measures were the second rise since the government floated the pound currency in November.

Government officials say spending cuts will help revive an economy where subsidies have accounted for about a quarter of state expenditures. But austerity carries risks for Sisi as inflation and a contested deal to hand two Red Sea islands to Saudi Arabia have eroded his public standing.

Prime Minister Sherif Ismail told reporters after the announcement that officials would monitor market prices, adding: "We will not allow any greed and exploitation of our citizens."

Petroleum Minister Tarek El Molla told Reuters the price of 92-octane gasoline had been put up by more than 40 percent to 5 Egyptian pounds ($0.2767) from 3.5 pounds per litre. Diesel and 80-octane - the most commonly used fuel categories - rose more than 50 percent to 3.65 pounds per litre from 2.35 pounds.

The government also increased the price of cooking gas cylinders - used mostly by poorer Egyptians - by 100 percent to 30 pounds ($1.66) from 15 pounds per cylinder.

Molla said the total subsidies for petroleum products in 2017-2018 would fall to 110 billion Egyptian pounds ($6.09 billion) from 145 billion pounds ($8.02 billion).

Fuel oil prices to cement factories will rise by 40 percent to 3,500 Egyptian pounds per tonne from 2,500 pounds a tonne, but gas prices to the industrial sector will remain stable, Molla said.

Last year, the government embarked on an ambitious reform programme to revive the economy that includes lifting subsidies, raising taxes and loosening capital controls as part of a three-year IMF agreement.


FOREIGN INVESTORS, TOURISTS

Egypt has been struggling since a 2011 uprising drove foreign investors and tourists away, and many Egyptians have been hit hard by record inflation and a local currency that has lost half its value since it was floated in November.

In December, Sisi said that tough economic conditions in Egypt would improve in six months. But for many Egyptians, conditions have deteriorated.

"It's completely the wrong timing. People can't take it anymore, all prices will increase," Cairo taxi driver Ehab Labib said of the fuel hike. "I will sell this taxi, what else am I going to do?"

Government officials say short-term austerity under the IMF plan will free up more financing for infrastructure and help draw foreign investment to help create jobs and economic growth.

Egypt is expected to receive the second IMF loan instalment of $1.25 billion within the coming few weeks.

The central bank floated the pound last November as part of reforms agreed with the IMF. At that time, the government increased fuel prices by as much as 46 percent.

Egyptian businessmen worry that they will have to bear the extra costs of Thursday's move and say they have not yet fully recovered from the impact of austerity measures taken over the past eight months.

"My expectation is costs will go up between 3-5 percent," said Hani Berzi, Edita Food Industries chairman, one of the country's largest food producers.

"I will have to absorb that, I have no intention of increasing prices... the market can't stand it."

Thursday's announcement came on the fourth anniversary of mass demonstrations against then-President Mohammed Mursi of the Muslim Brotherhood. Mursi, democratically elected after the 2011 revolution, was overthrown by Sisi, then the armed forces chief.

Sisi on Saturday also ratified an agreement that cedes sovereignty over two uninhabited Red Sea islands to Saudi Arabia, which had long claimed them, brushing off widespread public criticism of the deal. ($1 = 18.0700 Egyptian pounds) (Additional reporting by Amina Ismail; writing by Patrick Markey; editing by Mark Heinrich and Toby Davis)

Source: https://www.reuters.com/article/egypt-e ... SL8N1JQ1G5

[Horus]

I feel really sorry for the average Egyptian and wonder how they manage to survive, it seems to go from bad to worse.

[carrie]

In another post it was stated that pensions were to increase by 100le per month, wont go far, how are peo0ple going to manage?

[Dusak]

They could start by giving up or cutting back on smoking, not spending in the coffee shops and stop the kids from wasting petrol in their motorbikes, flying around at night doing nothing but causing a nuisance. But do you think they will? Not a cat in hells chance in this selfish male dominated world. Things are no different now as they were when I was a youngster. When cash was short, they gave up or cut back to make sure we always had enough to eat. I still remember my mother opening the cig nips on a Wednesday and rolling some ''new ones'' so she and he could have a cig until payday on the Friday. Food for the family came first, even though times then were not as bad for us as it is for the locals here, you can make changes until things get better.I pay my property tax on my second flat, but no Egyptian in my street that has rent earning flats have yet paid any tax, they say they are ''family or empty.''

[Major Thom]

But it does not stop at fuel prices, everything that is transported will go up in price to cover the cost of the rise in fuel prices.

[Dusak]

The local bus fairs have already began to rise, from between 25p -1Le.

[carrie]

Local bus fares have been 1le for ages.

[Major Thom]

I think for tourists and Europeans only Carrie, locals paid 50 piastes. I have to be honest I very rarely used this form of transport I put my safety first. Remember the multi deaths on the West Bank when two mini buses were racing each other and it ended up killing 18 people.

[carrie]

locals pay 1le.

[Dusak]

Local bus fares have been 1le for ages.

Yes, I know this you cooking sherry dipping numpty, this is the + increase now from that figure.

[carrie]

Hiccup shorry D

[DJKeefy]

I am told its now 1.50LE

[Hafiz]

Keefy has a later post on electricity prices – this comment applies to both and gas as well.

Basically most utilities have been provided for decades AT LESS THAN THE COST OF PRODUCTION to the whole population – rich and poor alike. Selling for less than cost only ends one way.

Its very convenient to blame it on the IMF/West/US and avoids the obvious point that you can’t run at a loss indefinitely. The IMF and World bank have been very clear, as they were in their previous Egyptian bail outs, that the poor should be protected. Well, maybe it will happen this time.

For an entirely different, and flippant, point of view about how price rises/removal of subsidies in Egypt are hurting the rich: https://www.thenational.ae/business/egy ... or-1.95955

It makes the point that up until now the rich in Egypt have driven their 4 wheel drives, heated their pools and used air conditioners as if there was no tomorrow (maybe there will be no tomorrow for some). For example since the uprising consumption of LPG and petrol have increased by more than 10% a year.

It makes the obvious point: “If you are looking to help the poor, subsidising energy (for everyone) is an extraordinarily inefficient way of doing so. The money spent on the subsidies would be far better spent on education, health and infrastructure the poor could benefit from. The government could also direct more funds to the poorest members of society through payments via smart cards and social funds, projects it has been working on.”

Nice idea – but didn’t the crooks clone the benefits ‘smart cards’ intended for the poor within a week or so of their launch several years ago and aren’t most of the manufacturers and speculators, sorry esteemed developers, still on government ‘benefits’ with gas/water/electricity/land/water.

The food/agriculture subsidy system is so perverse it defies description. If you wanted to design a system to keep farmers poor, suppress production, inflate consumption prices and maximize imports – couldn’t have done better.

The whole country seems to be a system of benefits and subsidies – few of which actually reach the poor. But given most of the poor are in rural areas or Upper Egypt and aren’t organized and therefore can’t create trouble in Tahir - the future looks OK - for some.