The changes, which see the 80-octane petrol favoured by many drivers especially of taxis rising by 78 per cent to LE1.60, and diesel, used in trucks and microbuses, increasing by 64 per cent to LE1.80, were inevitable, according to ministers defending the decision last week. They were followed by a restructuring of electricity subsidies, which will lead to a doubling of tariffs over five years. Energy subsidies representing almost 20 per cent of the government budget have been a burden on the country for years. Prime Minister Ibrahim Mehleb has said that Egypt has spent LE687 billion on energy subsidies over the past decade. However, the energy problem grew into a crisis only over the last three years, when the government, under the pressure of a lack of foreign currency, failed to meet its obligations to international companies, causing them to slow fuel exploration and production in the country. The generous subsidies bill has also been seen as a disincentive for consumers to rationalise their consumption, manifested in long hours of black-outs across the country and factories working at less than 50 per cent of capacity. While economists believe that the new steps are long overdue, they have raised fears that they could lead to double-digit inflation. With the increase in the costs of transportation the costs of inputs go up, and indirect increases are likely to be seen in commodities and services across the board. These include food and non-food commodities and even the cost of phone calls as mobile-phone towers are erected using diesel. The government is trying to absorb anger as a result of the price hikes by directing the savings created by the moves, some LE51 billion, to socially friendly policies such as increasing spending on education and healthcare, financing the minimum wage scheme, and increasing the number of beneficiaries of the social security system. Taking the plunge After years of hesitation, the government took the plunge this week and partially cut fuel subsidies, writes Niveen Wahish
Electricity prices rise Who will shoulder the planned increases in electricity prices, asks Noha Moustafa
Higher costs, higher price tags Slashing subsidies on natural gas for industry is bound to result in higher prices, writes Hayat Hussein
Tightening controls Strict market supervision and the provision of commodities at discount rates are key policies in combatting price hikes, writes Nesma Nowar Living with austerity The reduction of energy and electricity subsidies is only part of an overall scheme aiming at limiting the budget deficit to 10 per cent by reducing expenses and increasing tax revenues.
