** DID YOU MISS OUR SPECIAL ISSUE on the float of the EGP and the raising of petroleum prices? We scrapped our usual Weekend Edition to carry a special issue (the most-opened thing we’ve ever written for dispatch on a weekend) wrapping everything that happened on Thursday. If you missed it, check your inbox or tap here to read it on our website.

PETROLEUM SUBSIDIES JUST WENT UP. Two of the smartest big-company CEOs we know wrote in response to Friday’s special edition to point out the obvious: Fuel prices at the pump are up — but so, too, is the government’s subsidy spending. We’re embarrassed because they’re right, and we really should have caught that ourselves. We’re reproducing snippets of our conversations here with their permission:

Writes CEO #1: “I think it’s important to make your readers aware that, yes, energy prices increased by 30% on average while the currency devalued by about 60% — which means that the government just INCREASED subsidies on energy.”

CEO #2 added a couple of hours later: “You state that Egypt had cut fuel subsidies. That’s an inaccurate statement in my view, even though it’s being repeated by various news outlets. While EGPC did indeed increase fuel prices last night, the hike should have matched the rate of devaluation (i.e. 80%+) for subsidies to be maintained at the current level, let alone to cut them. The fact that the fuel price increases were only c. 30% actually means that technically, fuel subsidies in both relative and absolute terms have now actually grown, at least for the moment.”

The point both CEOs made on fuel subsidies was later touched upon by Finance Minister Amr El-Garhy and Oil Minister Tarek El-Molla at the cabinet economic group’s Friday press conference.

CEO #1 continues: “Another point is that raising interest rates has nothing to do with the transmission of monetary policy to people inside Egypt, but the transmission of monetary policy to people outside Egypt. It makes Egyptian government bonds in EGP more attractive to foreign institutional investors (the infamous carry trade).

“The logic is that the current account cannot improve quickly, because it takes time to increase exports. You have to restart factories, sign contracts in foreign markets, procure raw materials for those foreign markets, etc. So in the medium term, until export market opportunities are being developed, you have to plug the currency or balance of trade gap by activating the carry trade, there’s no other way.

“Also we still do have at least another two years of inflation above 10%, because you still have to raise / liberalize energy and food prices gradually, which will be an additional driver of EGP inflation for at least two more years, not to mention the upward adjustments in wages, which always lag inflation rates. Also the market was expecting a devaluation and a managed peg not a free float. The move to a free float is a good thing: Successive Egyptian governments have shown that they will not take these difficult decisions willingly and only when there is no other option will reform be made. The Ismail cabinet also deserves credit for the timing: Doing it before 11/11 requires guts.”

We agree: At the risk of coming across as a cheerleaders, we think this is one of those moments when business has to recognize that the government did the right thing — and we need to back it. The float of the EGP will be painful and will come with social challenges, but it is inarguably the right thing to have done. So, too, the fuel price hike, which we would hope is just the first of a two-round increase.

We as a community need to signal (very clearly) that the government has our confidence and our backing — at least when it comes to the reforms of Thursday. Many among us have legitimate concerns about other issues, from the crowding-out of the private sector to the need to switch to cash-transfers for the needy instead of commodity subsidies. Fine. But we need to keep in mind that worrying about this stuff without a float was akin to worrying that a patient has a slow-growing cancer when s/he is bleeding out after a catastrophic accident.

The next two years are going to be tough sledding. The decade after that could be amazing — if we get the interim right. And part of getting it right will be for us to back the government on the one issue on which we clearly have a meeting of the minds — as one of our CEOs said, doing so will “embolden them in their decision making later on” — even as we spar over other aspects of economic and social policy.