Egypt Watch

Egypt’s prime minister paves the way for new increases in fuel prices

Egyptian Prime Minister Mostafa Madbouly said that the recent increase in fuel prices imposed by his government did not exceed 9.7%, despite the significant increase in global oil prices, which reached 54%.

This came in a press conference on the sidelines of the government meeting in its new headquarters in the New Administrative Capital. “35% of the inflation rate in Egypt is currently coming from abroad, due to the rise in fuel and freight prices globally. Egypt is part of the world that is witnessing a very turbulent period in which it is experiencing an unprecedented wave of inflation, amid expectations that inflation will reach 5.5% in developed countries,” he added.

The government had implemented three consecutive increases in gasoline prices during April, July, and October of 2021. Thus, a liter of gasoline 80 became at a price of 7 pounds, a liter of gasoline 92 at a price of 8.25 pounds, a liter of gasoline 95 at a price of 9.25 pounds, and a liter of diesel at 6.75 pounds.

The latest increase was the eighth since President Abdel Fattah al-Sisi took office in 2014. The price of a liter of Octane 80 increased from 0.8 to 7 pounds per liter, an increase of more than 740%, and Octane 92 increased from 1.85 to 8.25 pounds, an increase of more than 330%. In 2019, the government began applying an automatic pricing mechanism to a number of petroleum products, after liberalizing their prices within a program that it implemented to gradually eliminate subsidies for these products.

The price equation states that gasoline prices are adjusted every three months, not exceeding 10% of the selling price in the local market, based on three main factors: the global price of a barrel of oil, the Egyptian pound exchange rate against the US dollar, and the amount of change in cost components.

The Egyptian authorities had imposed a tax on petroleum products, with the aim of fixing the selling price locally in the event of a decline in international fuel prices. Petroleum subsidies in Egypt’s general budget have declined by more than 87% during the past four fiscal years. In the budget for the fiscal year 2021-2022, subsidies for petroleum products decreased from 28.19 billion pounds to 18.41 billion pounds, a reduction of 35%, while it amounted to 145 billion pounds in the 2017-2018 budget.