Egypt president slashes fuel subsidies in risky move

Egypt’s Prime Minister Ibrahim Mahlab delivering a speech in Cairo.

Egypt’s Prime Minister Ibrahim Mahlab delivering a speech in Cairo.

CAIRO: Egypt has drastically raised fuel prices overnight to tackle a bloated subsidy system, in a potentially unpopular move that might blow back on President Abdel Fattah El-Sissi.

With the economy battered by three years of unrest, successive governments have said the subsidies that allowed Egyptians to buy gasoline at some of the world’s cheapest prices must be lifted.

Taxi drivers blocked roads in the Suez Canal city of Ismailiya and scuffled with police who tried to disperse them after the hikes went into effect.

Ex-army chief El-Sissi, elected by a landslide in May, has advocated austerity to narrow the budget deficit.

El-Sissi appears set on leveraging his popularity to ram through politically risky measures that foreign donors say are crucial to reforming a decrepit subsidy system.

The government raised the price of 92 octane gasoline from 1.85 Egyptian pounds ($0.36/27 euro cents) a liter to 2.60 pounds, and 80 octane gas from 0.90 pounds to 1.6 pounds a liter, the MENA news agency reported.

The price of diesel was raised from 1.1 pounds to 1.8.

The state spends more than 30 percent of its budget on fuel and food subsidies, in a country were nearly 40 percent of Egypt’s population of 86 million hover around the poverty line.

Taxi drivers in Ismailiya blocked off roads near the provincial headquarters, an AFP correspondent reported. Scuffles broke out when police tried to disperse them.

In Cairo, their enraged colleagues queued at gas stations after the prices went up.

“I wanted Sisi to lift subsidies for businessmen and factory owners, before the poor,” said taxi driver Mostafa Ibrahim.

Taxis, which have cheap fares compared with other countries, are commonly used in Egypt for everyday transport.

Prime Minister Ibrahim Mahlab said in comments aired on television that the increase would not affect food prices or hit the poor.

“Those most affected have cars, two cars or a big vehicle, but those who use microbuses will not be affected, and those are the ones I want to protect,” he said, referring to a form of transportation used among lower income Egyptians.

“Part of the subsidies (saved by the cuts) will go to services for those most in need,” he said, without elaborating.

Sisi has preached a message of 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 since the overthrow of the Mursi, who was viewed with suspicion by regional powerhouses such as Saudi Arabia and the United Arab Emirates.

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

 

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