BEIRUT

Regional

Egypt offers food discounts after fuel price increase

  • Egyptians gather at a petrol station on July 5, 2014 in Cairo as the government drastically raised fuel prices to tackle a bloated subsidy system. AFP PHOTO / MAHMOUD KHALED

CAIRO: Egypt’s military said it would use its buses to transport civilians and sell food at a discount amid concerns that a weekend decision to raise energy prices will fuel a surge in the cost of consumer goods.

The military will sell “ample quantities” of food products to help “alleviate the economic burden of the great Egyptian people,” spokesman Mohammad Samir Abdel Aziz said on his official Facebook page.

President Abdel-Fattah al-Sisi raised gasoline prices by as much as 78 percent over the weekend to save a nation “drowning in debt.” The move has already led to increased taxi and minibus fares. It was followed by increases in cigarette and alcohol taxes.

Sisi’s decision to reduce subsidies without introducing measures to protect the poor from a possible acceleration in inflation will test whether the president has secured enough public backing after leading the ouster of President Mohammad Morsi a year ago. He takes on a subsidy system that successive governments have steered clear of tampering with for fear of a backlash in the impoverished nation. Subsidies consume about 25 percent of state spending in Egypt.

“No one likes to see higher prices, but we need to give Sisi a chance,” Nasser Ismail, a 32-year-old carpenter waiting to catch a morning minibus to work, said. “These are difficult times and difficult decisions need to be made.”

Prime Minister Ibrahim Mahlab told a news conference July 5 that Egypt spent 687 billion pounds ($96 billion) on energy subsidies over the past decade, and will save 51 billion pounds from the new measures.

The fuel measures, announced on July 4, came a day after an increase in electricity prices, and are set to trigger secondary rises in other goods. The head of the Cairo Chamber of Commerce’s poultry division said chicken prices would rise by 25 percent within days because of added transportation costs, the state-run Al-Ahram reported. Minibus and taxi fares were raised by about 13 percent, according to state media.

Under the new pricing, 95-octane gasoline increased to 6.25 pounds a liter from 5.85 pounds, while 80-octane, which many drivers favor, rose 78 percent to 1.60 pounds. Diesel, used in trucks and minibuses, was raised 64 percent to 1.80 pounds, according to Al-Ahram.

Sisi also raised taxes on alcohol and cigarettes, according to the state-run Middle East News Agency, pushing the price of locally-made Marlboro cigarettes to around 20 pounds per pack at kiosks from 17 pounds a day earlier. “If they keep raising cigarette prices, it’ll be cheaper to smoke hashish,” Ayman Abdel-Ghani, 24, said as he switched from his preferred brand to slightly less expensive LM cigarettes.

The price increases “will probably have a negative impact on consumption in the short term,” Mohammad Abu Basha, a Cairo- based economist at EFG-Hermes Holdings SAE, said by phone. He said the government was “paving the way for more fiscal sustainability and for putting the economy on a path toward recovery.”

While a major backlash isn’t likely, “the government still doesn’t have the required social safety net in place, which is of concern,” Abu Basha said.

 
A version of this article appeared in the print edition of The Daily Star on July 08, 2014, on page 5.
Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

comments powered by Disqus
Summary

Egypt's military said it would use its buses to transport civilians and sell food at a discount amid concerns that a weekend decision to raise energy prices will fuel a surge in the cost of consumer goods.

Subsidies consume about 25 percent of state spending in Egypt.

Prime Minister Ibrahim Mahlab told a news conference July 5 that Egypt spent 687 billion pounds ($96 billion) on energy subsidies over the past decade, and will save 51 billion pounds from the new measures.

Under the new pricing, 95-octane gasoline increased to 6.25 pounds a liter from 5.85 pounds, while 80-octane, which many drivers favor, rose 78 percent to 1.60 pounds.


Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here