Gov’t hikes fuel prices 55%
Government hikes energy prices: The government raised energy prices by as much as 55% for fuel products and 100% for cooking gas, Prime Minister Sherif Ismail announced on Thursday (watch, runtime 14:40). “We took part of the value of the subsidies allocated to energy to use it for other subsidies that are important for limited-income and poor individuals,” said Ismail. The hike — third for fuel products since July 2014 — comes following a slew of measures enacted before the Eid break meant to strengthen the social safety net, including raises to pensions and ration card allocations. Fuel prices as of last Thursday are as follows:
- 95 octane petrol at the pumps will now cost EGP 6.60 per liter, up by 5.6% from EGP 6.25;
- 92 octane petrol rose by 43% to EGP 5.00 per liter from EGP 3.50 per liter;
- 80 octane petrol increased by 55% to EGP 3.65 per liter from EGP 2.35;
- Diesel fuel will also sell for EGP 3.65 per liter, up from EGP 2.35 before;
- Kerosene as well rose to EGP 3.65 per liter from EGP 2.35;
- Cooking gas cylinders doubled in price to reach EGP 30;
- Gas cylinders for commercial use also doubled in price to reach EGP 60;
- Compressed natural gas for automobiles rose by 25% to EGP 2 per cubic meter from EGP 1.60;
- Natural gas for households increased to between EGP 1 per cubic meter and EGP 2.25 depending on one’s consumption tier;
- Cement factories will also be paying a paying a higher price of EGP 3.5k per tonne of fuel oil (mazot) compared to EGP 2.5k previously.
The price of natural gas to industry will remain unchanged, according to a report from the Cabinet Information and Decision Support Center (IDSC). The report also states bus, metro, and railway tickets, will not rise, according to Al Shorouk.
Impact of the hike: Inflation, already at around 31.1%, is expected to accelerate 4-5% after this latest reduction of fuel subsidies, said the Prime Minister, according to Bloomberg. According to a CAPMAS report (pdf), transportation costs will rise 5-15%. The governorates of Giza and Marsa Matrouh have already allowed taxi fares to officially increase, while drivers in Cairo and elsewhere have been unilaterally raising prices.
Reactions to the price the hikes coming from the IMF were positive. “The fuel price increases, together with the higher social spending already announced, will help the budget while protecting the poor,” Chris Jarvis, the IMF’s mission chief to Egypt, told Bloomberg.
The private sector appears to have taken the move in stride, with the FEI noting that the move will have a marginal effect costs in most industries, but are vital to economic reform efforts, according to Al Mal. Naguib Sawiris was of the same mind, telling Lamees Al Hadidi on last night’s Hona Al Asema that it was a “brave move.” “The government is getting all the painful measures done” this fiscal year, said Arqaam Capital’s Reham El Desoki. “That’s probably the government’s strategy: ‘Now, the worst is probably behind us,’” she tells Bloomberg.
The House hasn’t taken well to the news: Rep. Mostafa Bakry submitted a request to House Speaker Ali Abdel Aal to discuss the decision on Monday and to summon Sherif Ismail and the petroleum and finance ministers, according to Al Mal. Rep. Mortada El Araby announced he will submit his resignation on Tuesday in protest.
The private sector will adjust pricing as a result of fuel price rises at the same time as the value-added tax rises to 14% from 13%. Cuts to fuel subsidies will make it 3% more expensive to produce food, said an official at the Federation of Egyptian Industries’ (FEI) food industries division. Auto parts will rise 5-7% in price, Al Mal quotes an industry official as saying, and ride-hailing services Uber and Careem are also studying price increases.
But companies (food producers in particular) should tread lightly: The Supply Ministry will be issuing new directives that outline “more severe punishments” for those who engage in price gouging, Supply Minister Ali El Moselhy said after a cabinet meeting on Saturday, Al Shorouk reports. Meanwhile, the Health Ministry has denied the cost of meds will increase after reports claimed the cost of 5k products will rise, according to the newspaper.