On Monday, Electricity Minister Mohamed Shaker said that power tariffs would increase by 25 to 40 per cent according to different consumption brackets. The increases come as part of government plans to phase out electricity subsidies by 2019. They will be applied retroactively for July, with spokesman for the Electricity Ministry Mohamed Al-Yamani saying that the increase in July's bills would be paid in instalments over 10 months. “The electricity subsidies bill this fiscal year would have been LE46 billion instead of LE29 billion if we hadn't increased the prices,” Al-Yamani said, adding that the increases had been approved by the cabinet. The hikes this year are higher than initially planned due to increases in the cost of electricity production. Al-Yamani said that dwindling local production had forced the country to import more gas for power generation and the devaluation of the pound had made these imports more expensive. The devaluation of the Egyptian pound and the elimination of power subsidies are essential parts of the reform programme put together to allow Egypt to acquire a loan from the IMF, currently being negotiated for a total figure of $12 billion. The hike in electricity prices will likely push up inflation rates, according to the consumers and producers spoken to by Al-Ahram Weekly. However, “the impact of the residential electricity price hike on annual headline inflation will not be significant, given that electricity as a utility constitutes around 2.5 per cent of the consumer price index overall,” said Reham Al-Dessouki, a senior economist at Arqaam Securities, in a report released on Tuesday. She added that a bigger impact could stem from the general increase in prices in the commercial sector, where the increase in electricity bills would be an average of 20 per cent. This additional cost could then be passed on to consumers. Al-Dessouki said that despite the negative impacts the fiscal and monetary reforms could have on inflation and consumption growth in the short term, the government's forging ahead with the electricity price hikes was a sign of its commitment to reform and was important with negotiations with the IMF wrapping up in a week's time.
