The Egyptian government’s decision to increase fuel prices on Friday is expected to compound inflationary challenges for the populace already grappling with economic strains.
Announced on the Cabinet’s official Facebook page, the new fuel prices took effect on Friday morning. Diesel, a crucial fuel for both transportation and goods movement, saw a hike from 8.5 Egyptian pounds ($0.18) to 10 pounds ($0.21) per litre.
Additionally, Egypt, heavily reliant on energy imports, raised the price of 95-octane gasoline to 13.5 Egyptian pounds ($0.29) per litre, up from 12.5 pounds ($0.27).
The government attributed these price adjustments to the escalating costs of energy imports, driven by the depreciation of the local currency and global energy price spikes following disruptions in the Red Sea.
Earlier in March, Egypt’s central bank announced a shift to a market-based exchange rate after a prolonged period of defending an overvalued local currency. Consequently, the official exchange rate of the pound against the U.S. dollar plummeted from nearly 31 to 51, before recovering by almost 10% in recent weeks due to substantial inflows of foreign currency into the banking sector.
Alongside fuel prices, the government also raised the cost of widely used butane gas cylinders from 75 Egyptian pounds ($1.61) to 100 pounds ($2.14). Last year, it was reported that Egyptians consume approximately 800,000 butane cylinders daily, with half of them being imported.
These fuel price hikes are anticipated to further strain consumer purchasing power and exacerbate inflation rates. In the preceding month, urban inflation surged to 35.7%, up from 29.8% in January, with food costs alone skyrocketing nearly 51% in February compared to the previous year.
Aligned with conditions set by the International Monetary Fund (IMF) for further financial assistance, Egypt recently secured a deal to increase an IMF bailout from $3 billion to $8 billion after extensive negotiations. The IMF has consistently urged the government to devalue the currency and implement monetary and fiscal austerity measures, including reducing government subsidies.
