Egypt's President defends rise in fuel prices and cigarette, alcohol taxes

CAIRO (AFP) - Egypt's President Abdel Fattah al-Sisi on Sunday defended a government decision to raise fuel prices as the authorities also slapped higher taxes on cigarettes and alcohol, state media reported.

Late Friday, the authorities decided to slash state subsidies on petrol and diesel, sparking anger among taxi drivers.

In a meeting with newspaper editors and television channel representatives, Mr Sisi said the decision had to be taken because of the country's debts, the state-run Al-Ahram newspaper's website reported.

With the economy battered by three years of unrest, successive governments have said subsidies - that meant petrol in Egypt was among the world's cheapest - must be lifted.

The former army chief, who toppled Islamist president Mohamed Mursi in July 2013 before being elected president by a landslide in May, has repeatedly advocated austerity to narrow the budget deficit.

"Whether we wanted to or not, these decisions had to be taken, now or later," Al-Ahram quoted Mr Sisi as saying. "It's better to face (the situation) instead of letting the country drown."

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 of 86 million hover around the poverty line.

On Sunday, the authorities also announced a new tax of 50 per cent of the retail price of imported cigarettes, while local cigarettes will be subject to a few extra pounds' tax, the state news agency Mena reported.

Local and imported beers were slapped with a 200 per cent tax increase, while local and imported wines become subject to a 150 per cent increase, it said.

With many fearing that the fuel price rises will impact other prices, Mr Sisi acknowledged that Egypt currently lacked any market controls, but said such mechanisms should be fully operating within six months, Mena said.

The political turmoil unleashed by the ouster of strongman Hosni Mubarak in 2011 has devastated the economy, badly hitting key tourist revenues and investments.

Since the overthrow of Mursi, who was viewed with suspicion by regional powerhouses such as Saudi Arabia and the United Arab Emirates, Gulf Arab states have pledged billions of dollars in aid to Egypt's military-installed authorities.