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Economy

Egypt slashes fuel subsidies to ease pressure on state finances

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Subsidies are the lifeblood of many Egyptians but eat up almost a third of the government’s budget.

Saturday 06, July 2019

The Egyptian government has slashed fuel subsidies as part of an economic overhaul backed by the International Monetary Fund, easing pressure on public finances but dealing a new blow to consumers already struggling with double-digit inflation.

The oil ministry stated that the decision, effective 5 July, raises the price of diesel by 22.7 per cent, higher-grade 95 and 92 octane gasoline by 16 per cent and 18.5 per cent respectively and lower-grade 80 octane gasoline has increased by 22.7 per cent.

The hikes are the latest effort by Egypt to curb government spending and cut the deficit. Egypt devalued the pound in 2016, the currency halved in value against the US dollar driving inflation to levels well above 30 per cent before the pace of price increases began to cool.

Additionally, the central bank has cut the benchmark interest rate only once in the past year and is unlikely to act again until it can judge the inflationary impact of the latest fuel-price hikes.

Last month, the government said that electricity prices would rise by almost 15 per cent in the fiscal year that begins 1 July, which will enable the saving of almost $1 billion, reported Bloomberg.

 

TAGS : International Monetary Fund, Fuel subsidies , CBE

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