Last Wednesday, the Egyptian government raised the prices of all types of fuel by rates ranging between 5.7% and 10.25%, including diesel, which is widely used in mass transportation of individuals and transportation of goods, which led to an increase in prices in many sectors, which raised public anger among citizens already suffering from the country’s severe economic crisis. The government justified its decision with the rise in global oil prices and the pound’s exchange rate drop against the dollar. To spare the state budget, more fuel subsidies burden so it can face global inflationary pressures. At the same time, the opposition asserts that the decision is new evidence of the government’s inability to find solutions to the economic crisis away from the citizens’ pockets. This will lead to a further deterioration in the standard of living and disruption of economic activity, to an unprecedented high level of inflation.

Wide impact

The price of a litre of 80 petrol increased from 7.5 pounds to 8 pounds (6.6%), 92 petrol from 8.75 pounds to 9.25 pounds (5.7%), and 95 petrol from 9.75 to 10.75 (10.25%), while the prices of a litre of kerosene (gas) and diesel increased from 6.75 to 7.25 (7.4%). The decision included raising the price of a ton of diesel fuel from 400 pounds to 5,000 pounds, except for diesel used in the electricity generation and food industries. The government reviews the prices of petroleum products every three months through a committee called the Automatic Pricing Committee for Petroleum Products, which was established in December 2018 to liberalize fuel prices by linking it to international prices and the exchange rate of the pound against the dollar, to reduce the cost of subsidizing petroleum products in the state’s general budget. According to the decision of establishing the committee, the rate of increase or decrease should not exceed 10% as a maximum.

The new pricing decision resulted in an increase in the fare for most public and private mass transportation. Still, the amount of the fare increase exceeded the rate of growth in the price of petroleum products by more than double in some cases, reaching about 17%, while the government stands unable to control matters. The decision is expected to have significant effects during the next few days, especially on food prices, because it included raising the diesel price after 11 previous decisions to fix its price. Diesel is used to transporting goods of all kinds and is the fuel used to operate agricultural machinery.

According to Dina Armanious, professor of statistics at Cairo University, raising the price of diesel will significantly impact inflation, especially in the food and beverage sector. This means a multiplier effect on the poor, whose spending is primarily focused on food and drink. Arminius points out that “increasing the price of diesel has a significant impact on the subsidized commodities within the subsidy system, which practically means a deduction from the subsidy, in light of the stability of the per capita monthly subsidy at the level of 50 pounds.”

Comprehensive rejection of the decision

The government’s decision faced sharp criticism from citizens, who considered it adding new burdens to their shoulders in the light of the economic crisis and the wave of inflation that the country has been going through since the beginning of this year. Clear objections emerged in the means of transportation in protest against the increase in the fare. The Egyptian opposition attacked the decision to raise the prices of petroleum products. Representative Diaa El-Din Daoud, a member of the House of Representatives, said that the decision “expresses the government’s inability to find economic solutions. It was most able to provide financial solutions that exhausted the treasury and incurred enormous debts for people whose instalments and interests exceeded 1,000 and 100 billion pounds.

Daoud rejected the government’s justifications, saying: “The logic provided by the government to justify raising the prices of everything is a comparison with international prices, and we have always replied to them that we have not yet reached a global life to raise the burdens on international prices.” He compared the price of a litre of gasoline in the Gulf and Egypt. And how in Egypt, it is very much less, according to the government’s logic, saying: “Give people an income equal to that of the Gulf and then speak.”

Ahmed El-Sayed El-Naggar, an economist and former Chairman of the Board of Directors of the Al-Ahram Foundation, criticized the government’s decision, stressing that when commodity pricing is in the hands of the socially responsible government, it does not raise the price just because the price rose in international markets under the pretext of taking the opportunity return into account, but rather considers the ability of The different segments of consumers have to bear any increase in prices. They also look at the movement of wages because when energy prices rise, the prices of all goods and services that enter as a component in the rise, and in this case, it is not correct for wages to remain constant, which is the equivalent of the labour service provided by man as if all goods and services rise in price. In contrast, the person and his services (work) remain constant or cheap. If wages and pensions do not rise, then any rise in prices caused by the increase in energy prices will mean a deterioration in the purchasing power of salaries and pensions, the sliding of part of the lower segments of the middle class into the ranks of the poor, and an increase in the poverty of the poor.

The Justice Party announced its rebuke of the government’s decision to raise fuel prices, and the party said in a statement: Egypt is going through difficult economic conditions, resulting from the rise in the prices of many strategic commodities, including fuel prices, significantly raising the prices of gasoline and diesel. In particular, growing diesel prices will cause the prices of all commodities and movables to rise, exacerbating the current wave of inflation.