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Egypt’s Govt Slashes Fuel Subsidies

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The government of Egypt has drastically reduced fuel subsidies as part of an economic reform supported by the International Monetary Fund, to relieve pressure on the public economy.

GISTOK understands that the IMF had a few months ago, noted that Nigeria and other countries in all have spent $ 5.2 trillion in fuel subsidies since 2015 and, as such, should eliminate the fuel subsidy

However, the decision that will come into effect on July 5 will affect consumers who are already struggling with double-digit inflation, as it raises the price of diesel, used by trucks, buses and other drivers by 22.7% .

According to a statement from the Ministry of Petroleum, the price of gasoline of higher and lower octane numbers of 95 and 92 octane increased by 16% and 18.5%, while lower octane gasoline of 80 octane increased by 22.7% .

Aljazeera reports that the hikes are the latest steps taken by the most populous nation in the Arab world to curb government spending and reduce the deficit.

Egypt devalued the pound in 2016. The currency was reduced by half in value against the US dollar, bringing inflation to levels well above 30% before the pace of price increases began to cool.

The central bank reduced the benchmark interest rate only once in the last year and is unlikely to act again until it can judge the inflationary impact of the latest rises in fuel prices.

Subsidies are the life blood of many Egyptians, but they consume almost a third of the government’s budget. Any effort to reform the food subsidy system is fraught with political dangers in a country where tens of millions depend on bread subsidized by the state, so the authorities have focused on electricity and fuel.

The government announced last month that electricity prices would rise by almost 15% in the fiscal year beginning July 1, saving nearly $ 1 billion.

The next step in the fuel subsidy reform plan is an indexing mechanism that links local fuel prices with international prices. Subsidies for the highest-grade fuel, 95 octane, have already been lifted, and gasoline is now sold at market value.