CAIRO (Reuters) - Egypt on Thursday (June 29) hiked fuel prices by up to 50 per cent to help meet terms of a US$12 billion IMF loan deal, a sharper rise than expected by many struggling with soaring living costs and a further test of President Abdel Fattah al-Sisi's popularity.
Fuel price increases had been widely anticipated as part of Egypt's loan accord with the International Monetary Fund and Thursday's measures were the second rise since the government floated the pound currency in November.
Government officials say spending cuts will help revive an economy where subsidies have accounted for about a quarter of state expenditures. But austerity carries risks for Sisi as inflation and a contested deal to hand two Red Sea islands to Saudi Arabia have eroded his public standing.
Prime Minister Sherif Ismail told reporters after the announcement that officials would monitor market prices, adding:"We will not allow any greed and exploitation of our citizens."
Petroleum Minister Tarek El Molla told Reuters the price of 92-octane gasoline had been put up by more than 40 per cent to 5 Egyptian pounds (US$0.2767) from 3.5 pounds per litre.
Diesel and 80-octane - the most commonly used fuel categories - rose more than 50 per cent to 3.65 pounds per litre from 2.35 pounds.
The government also increased the price of cooking gas cylinders - used mostly by poorer Egyptians - by 100 percent to 30 pounds (US$1.66) from 15 pounds per cylinder.
Molla said the total subsidies for petroleum products in 2017-2018 would fall to 110 billion Egyptian pounds (US$6.09 billion) from 145 billion pounds (US$8.02 billion).
Last year, the government embarked on an ambitious reform programme to revive the economy that includes lifting subsidies, raising taxes and loosening capital controls as part of a three-year IMF agreement.
LOSS OF FOREIGN INVESTORS, TOURISTS
Egypt has been struggling since a 2011 uprising drove foreign investors and tourists away, and many Egyptians have been hit hard by record inflation and a local currency that has lost half its value since it was floated in November.
"It's very wrong timing. People can't take it anymore, all prices will increase," taxi driver Ehab Labib said in Cairo. "I will sell this taxi, what else am I going to do?"
Government officials say short-term austerity under the IMF plan will free up more financing for infrastructure and help draw foreign investment to help create jobs and economic growth.
Egypt is expected to receive the second loan IMF loan instalment of US$1.25 billion within the coming few weeks.
The central bank floated the pound last November as part of reforms agreed with the IMF. At that time, the government increased fuel prices by as much as 46 per cent.
"The fuel prices hike was expected in line with the government's economic programme and the IMF deal. It will directly affect the middle and low-income classes, we will see a second wave of inflation," Reham El-Desouki, economist at Arqaam Capital, told Reuters.
Thursday's announcement came on the fourth anniversary of mass demonstrations against then-President Mohammed Mursi of the Muslim Brotherhood. Mursi, democratically elected after the 2011 revolution, was overthrown by Sisi, then the armed forces chief.
Sisi on Saturday also ratified an agreement that cedes sovereignty over two uninhabited Red Sea islands to Saudi Arabia, which had long claimed them, brushing off widespread public criticism of the deal.