Egyptian minister of planning Ashraf Al-Araby said on Saturday his country will raise the prices of electricity and fuel “as soon as possible” to address the budget deficit problem “decisively.”
Energy prices in Egypt are among the least in the world. The government, which suffers from shortage in liquidity, spends more than 20 percent of its budget on energy subsidies.
Even though successive governments called for subsidy reform, none of them raised prices for fear of popular protests.
At a press conference held in Cairo on Saturday, Al-Araby said that the budget deficit in the current fiscal year will range between EGP 240 and 250 billion.
“The coming phase will witness difficult decisions. I believe that society is ready to accept these decisions. The rich will bear the largest burden in these reforms,” he said.
Approximately 25 million Egyptians live below the poverty line.
During the press conference, in which electricity went off about four times, Al-Araby said: “With the new fiscal year, there will be a number of procedures to confront the deficit decisively. There will be rises in electricity prices for those who consume more, and petroleum products will be repriced. The entire price liberation scheme will be implemented within 3-5 years.”
The minster has not provided further details about the expected rise.
Al-Araby’s remarks represent the first official government statement on electricity price rises, and the second on petroleum products’ price rise, which signals an approaching implementation of the plan.
The statements came after president Abdel-Fattah al-Sisi hinted at possible austerity measures to reduce the budget deficit of the fiscal year 2014-2015 to control public debt.
Al-Sisi is facing increasing budget deficit, high employment rates, and wide-ranging institutional corruption.
Asked whether transportation costs and prices of other commodities would increase as a result of higher fuel prices, Al-Araby said: “Any procedures will have negative effects.”
He added that his country will work over the next three months to complete the issuance and distribution of million smart cards to be used for fuel consumption, in addition to 2 million others which have already been issued and distributed.
Furthermore, Al-Araby said his country expects to pump government investments worth EGP 67 billion in the new fiscal year, with the possibility to raise them using stimulus packages if needed.
Government investments in the fiscal year 2013-2014 amounted to EGP 95 billion, including two stimulus packages worth EGP 60 billion.