CAIRO: Egypt raised the price of state-subsidised cooking gas for the first time in two decades yesterday, a government official said, trimming an unaffordable subsidy bill but increasing the risk of unrest.
The price rise comes two days before an IMF mission arrives in Cairo to continue talks on a $4.8bn loan needed to stave off a budget crisis and support a fast-weakening currency.
Paralysed by political and economic instability since President Hosni Mubarak was ousted more than two years ago, the government is now scrambling to pay for vital food and fuel imports and Egypt’s foreign reserves are at a critical level.
Progress in reducing the state subsidy bill would help Egypt secure a long-awaited deal with the IMF. The government increased the price of cooking gas cylinders sold for domestic use by 60 percent to 8 Egyptian pounds ($1.18) a bottle, and doubled it for the bigger bottles used by businesses, an official at the supplies ministry said.
Although it marks a big rise, Egyptians had grown used to paying as much as 50 pounds a bottle last year on a black market where the state-subsidised gas bottles are sold at a mark-up.
Those prices have now fallen to 10 to 15 pounds a bottle, according to Egyptian media reports.
The official said the move was part of a government reform programme to bring down the cost of subsidizing energy. He said the price for butane gas cylinders would rise to 16 pounds for commercial use from the current price of 8 pounds.
Citing the ministry, the state news agency MENA said anyone found overcharging in the future would face “tough punishment according to the law which could include prison sentences”. It did not say how the distribution system would be improved.
The IMF delegation is due to arrive tomorrow.
President Mohamed Mursi initialled an IMF agreement in November but postponed ratification in December when a row over the extent of his powers triggered unrest. In another step to curb the energy subsidy bill, the government has said it plans to introduce a new fuel rationing system from July 1.
But in a sign that implementation could be delayed, the oil minister was quoted as saying the government had planned for a scenario in which implementation is delayed until January, and another where it is put off until the next financial year.
Reuters
