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Egypt premier defends steep rise in energy prices

Published on NewsOK Modified: July 5, 2014 at 2:13 pm •  Published: July 5, 2014

CAIRO (AP) — Egypt's prime minister on Saturday defended a steep rise in fuel prices as necessary move to shore up the treasury, as outraged commuters bickered with public transport drivers over fare hikes and some rushed to gas stations over fears of shortages.

The price increases of up to 80 percent came into force early on Saturday in a swift announcement made just hours earlier, following promises to cut subsidies that eat up nearly a quarter of the state budget. They also come after an increase in electricity prices that were put in effect at the start of July.

Prime Minister Ibrahim Mahlab, addressing a televised news conference, said energy subsidies have over the past decade cost the treasury a staggering 687 billion pounds (nearly $100 billion) that could have been used to bolster essential services.

He said it would be a "crime" if his government did not move to start lifting subsidies. He argued that 26.3 percent of Egypt's estimated 86 million people live in poverty and that overall unemployment stands at 13.6 percent, reaching above 50 percent for Egyptians aged between 20 and 30.

"There will have to be political, social and economic reforms," vowed Mahlab. "Debts are mounting and the question we must ask ourselves is whether we want to leave this legacy for future generations."

Mahlab said the partial lifting of energy subsidies would free 51 billion pounds (about $7 billion) to be spent on education, health care, pensions and raising wages.

Newly elected President Abdel-Fattah el-Sissi has said he would need to tackle the tough issue of subsidies and asked every Egyptian to be ready to sacrifice to help the country's battered economy after three years of turmoil.

The former military chief also asked the government to amend the largest budget in Egypt's history - at $115 billion - to reduce its deficit from 12 to 10 percent.

The fuel price rise was highest for 80 octane gasoline, used mostly by old vehicles that still fill Egyptian streets, with the price jumping 78 percent to 22 cents per liter. Diesel fuel, used by most of Egypt's public transport and trucks, increased 64 percent to 25 cents a liter. Gasoline that is 92 octane increased by 40 percent to 37 cents a liter.

Successive Egyptian leaders have balked at reducing energy subsidies, fearing unrest.

In some areas, the decision spurred a rush on gas stations, with long lines forming and many motorists frustrated.

Some drivers of Egypt's popular microbuses had raised their fares before the government announced exact increases. Mahlab warned that authorities would intervene to make sure fare increases are limited to around 10 percent. Taxi meters will also be changed to allow for higher fares, he added.

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