Egypt unveils fuel subsidy cuts

Egypt introduced its latest round of fuel subsidy cuts on Friday, raising domestic prices by between 16% and 30% as it nears the end of an IMF-backed economic reform programme.

The price of widely used 92 octane grade petrol rose by 18.5% to 8 pounds ($0.4825) a litre, while lower quality 80 octane rose by 22.7% to 6.75 pounds ($0.4071) a litre, the petroleum ministry said in a statement.

Higher grade 95 octane fuel rose by 16.1% to 9 Egyptian pounds ($0.5428) a litre, and diesel rose by 22.7% to 6.75 pounds per litre. The price of cooking gas cylinders rose by 30% to 65 pounds for domestic use and 130 pounds for commercial use.

Scaling back fuel subsidies was a key plank of a three-year $12 billion economic reform package signed with the International Monetary Fund (IMF) in November 2016. Energy subsidies had eaten up as much as 20 per cent of the government’s budget in recent years.

The reforms also included a sharp devaluation of the Egyptian pound and led to rapid inflation that later cooled.

They have improved the country’s macro economic indicators but have increased the financial strain for tens of millions of Egyptians, many of whom live under the poverty line.

Foreign direct investment (FDI) in Egypt’s non-oil economy fell in the first three months of 2019 to its lowest for at least five years, underscoring the struggle to kindle confidence as a rigorous IMF programme draws to a close.

Non-oil FDI slid to around $400 million during the quarter, from $950 million in the previous quarter and $720 million in the first quarter of 2018, according to Reuters calculations using central bank figures.

Economists say a lack of consumer demand after nearly three years of austerity measures, high interest rates and the expansion of state-owned companies into the economy have dampened investor appetite, as has a dearth of privatisations.

Reuters