The Egyptian cabinet announced on Thursday rise of fuel prices as part of the country's strict economic reform program, the Egyptian state TV reported. The hike in gasoline prices varied from 42.8 to 55.3 percent, while the price of a gas cylinder, which is used at many homes and restaurants, doubled.
"The fuel price hikes take effect from today," said the cabinet in a statement. Egyptian Prime Minister Sherif Ismail told a press conference Thursday that the decision is "a part of the economic reform program," stressing that it aims to deliver the government subsidies to those who deserve them.
"This decision is considered direct support for the Egyptian citizens and is meant to improve the service provided to them," he added. The fuel price hike is the second in less than a year since a similar rise in early November 2016, in which fuel prices increased by 34.6 percent to 46.9 percent.
The latest fuel price hike worries many Egyptians as it usually leads to price increase for almost all other commodities as a result. Suffering from an economic slowdown over the past few years due to political turmoil and security issues, Egypt has started a three-year economic reform program, which includes austerity measures, energy subsidy cuts and a floating exchange rate.
Under an agreement signed with Egypt in August 2016, the International Monetary Fund (IMF) agreed to extend a three-year loan of 12 billion U.S. dollars to support Egypt's economic reform program. The IMF provided Egypt 2.75 billion dollars as the first batch of the loan in November 2016. The second tranche of 1.25 billion dollars is expected to be delivered later this year.
In order to secure the IMF loan, Egypt has since devalued the Egyptian pound against the U.S. dollar in a floating exchange rate, while lifting subsidies on petroleum fuels. These measures have led to sharp rise in Egypt's inflation rate, which was 29.7 percent in May.
In addition to the IMF loan, Egypt has also got a loan of 3 billion dollars from the World Bank, and another loan of 332 million dollars from the Arab Monetary Fund. These loans, aimed to reduce Egypt's balance of payments deficit due to sharp decline in tourism revenues as result of political turbulences and terror attacks, have raised questions about Cairo's ability to pay off its external debts.
To help ease the inflationary pressure on the country's low-income citizens, the Egyptian government will raise a monthly cash subsidy for them from July 1 as part of its social protection plan. The monthly cash subsidy for each low-income Egyptian will be raised to 50 Egyptian pounds (about 2.76 U.S. dollars) from 21 (1.16 U.S. dollars) pounds. This will cost the state budget 85 billion pounds (4.69 billion U.S. dollars) annually.
About 27 percent of Egypt's 92 million population live below the poverty line, according to data from the state-run Central Agency for Public Mobilization and Statistics.