Egyptians bear 70% of fuel prices through threefold price hikes in 2 years

Doaa A. Moneam
3 Min Read

To meet the demands of the IMF to grant Egypt the $12bn loan, curb the budget deficit, and to deal with the increasing inflation rate, fuel subsidies underwent non-recurrent stages to be phased out, toward being fully suspended in 2019 according to a subsequent 2018 statement for the Minister of Petroleum and Mineral Resources, Tarek El-Molla.

In April 2018, six months before the implementation of the floatation of the Egyptian pound in the fiscal year (FY) 2016/17.

This announcement was followed by another issued by the former Minister of Finance, Amr Al Garhy who revealed that energy subsidies would fall, by almost half, to EGP 35bn from about EGP 61bn in the FY 2015/16 budget.

In November 4 2016, the government announced the beginning of phasing out of fuel subsidies, declaring the new prices which really shocked the market, raising them by 31% up to 47% for 95 octane petrol, 92 octane petrol, 80 octane petrol, diesel, and kerosene.

In June 29 2017, the government announced the raising of fuel prices for the second time in less than a year by up to 55%, followed by another raise by in June 16 2018, by up to 66%, waiting for new prices hikes in March. Currently, the government supported fuel prices by between 25% and 30% through subsidies, compared with 70% of fuel prices which are borne by Egyptian citizens.

Earlier this year, El-Molla unveiled that automatic fuel pricing will start in April to be applied on Octane 95 only, through a new automatic price index mechanism in order to link gasoline prices to global oil prices. He added that the price is expected to remain the same or change by only 10% give or take, without affecting the prices of 92 octane or 80 octane gasoline.

The new mechanism will be supervised by a technical committee that will be formed to review the pricing mechanism on 95 octane gasoline every three months this year.

Noteworthy, Egypt recorded a government budget deficit equal to 9.50% of the country’s GDP in 2017. The government budget in Egypt is averaged at -9.72% per cent of the GDP from 2002 until 2017, reaching an all-time high of -6.80% of the GDP in 2008 and a record low of -13.30% of the GDP in 2013, according to Trading Economics, estimating that the government budget in Egypt is projected to record -8.40% of the GDP by the end of this quarter. For the long-term, the government budget in Egypt is projected to float around -7.50% of the GDP in 2020, according to Trading Economics’ econometric models.

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