Egypt raises fuel prices to slash subsidies

July 05, 2014 - 12:04:04 pm

CAIRO: Egypt's government drastically raised fuel prices late Friday to tackle a bloated subsidy system, in a potentially unpopular move that might blow back on newly elected President Abdel Fattah al-Sisi.

With an economy battered by three years of unrest, successive governments had said that the subsidies which allow Egyptians to buy gasoline at some of the world's cheapest prices must be lifted.

But the authorities had shied away from implementing the cuts fearing a public backlash, something that Sisi, elected in May, has said would not prevent him from slashing state spending.

The government raised the price of 92 octane gasoline, which sold at 1.85 pounds ($0.36) a litre, to 2.6 pounds, and 80 octane gas from 0.9 pounds to 1.6 pounds a litre, the official MENA news agency reported.

The price of diesel was raised from 1.1 pounds to 1.8 per litre, the agency reported.

The price increase took effect at midnight Friday.

The state spends more than 30 percent of its budget on fuel and food subsidies, in a country were nearly 40 percent of the population -- some 34 million people -- hover around the poverty line.

Prime Minister Ibrahim Mahlab said the increase would not affect food prices, Al-Ahram newspaper reported.

He called on "Egyptians to come together and understand the challenges of this period, and to stand with the government," the newspaper said.

Sisi, a former army chief who came to power in elections after overthrowing Islamist president Mohamed Morsi a year ago, preaches a message of austerity and self sacrifice to restore the economy.

He has launched a donation drive and announced he would give away part of his salary and personal wealth, while urging Egyptians to bike and walk more to save on gas.

 

The economy has been propped up by billions of dollars in Gulf Arab state aid after the overthrow of the Morsi, whom regional powerhouses such as Saudi Arabia and the United Arab Emirates viewed with suspicion.

The government has also signed off on a capital gains tax and said it would gradually raise electricity prices over the next five years.

Sisi won the May election by about 97 percent of the vote against a weak leftist candidate, and many view him as a strong leader who can kickstart a recovery.

But Mursi's Muslim Brotherhood movement, decimated in a brutal crackdown after his overthrow, still holds near daily protests it hopes will grow with increasing economic discontent.

An early 2011 uprising that ousted veteran dictator Hosni Mubarak sent the economy into a downward spiral.

The country has just began to recover when the military, prompted by huge protests, overthrew Mursi in July last year.

Since then Egypt has been rocked by bloody street clashes and militant attacks in which almost 2,000 people have been killed. (AFP)

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