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Egypt's Sisi slashes fuel subsidies in risky move

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AFP Cairo
Egypt has drastically raised fuel prices overnight to tackle a bloated subsidy system, in a potentially unpopular move that might blow back on newly elected President Abdel Fattah al-Sisi.

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.

Ex-army chief Sisi, elected by a landslide in May, has advocated austerity to narrow the budget deficit, and a severe law and order platform to rein in Islamist supporters of ousted president Mohamed Morsi.

Morsi himself had balked at implementing the cuts, to avoid stoking unrest, but the military ousted the divisive leader anyway after millions took to the streets demanding his resignation.
 

With the main Islamist opposition decimated, Sisi 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 (USD 0.36/27 euro cents) a litre to 2.60 pounds, and 80 octane gas from 0.90 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.

The increase took effect at midnight yesterday.

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

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 without elaborating, referring to a common form of transportation among lower income Egyptians.

"Part of the subsidies (saved by the cuts) will go to services for those most in need," he said.

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 Morsi, whom regional powerhouses such as Saudi Arabia and the United Arab Emirates viewed with suspicion.

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First Published: Jul 05 2014 | 6:29 PM IST

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