Egypt raised mainstream fuel prices by up to 78 percent, following on a promise to cut subsidies that eat up nearly a quarter of the government’s budget, state news agency MENA reported.
The price increases were in effect as of Friday midnight. The decision follows Cabinet approval this week after it amended the budget to reduce a staggering deficit.
But the new prices were made public only a few hours before the decision was implemented.
Shortly before the price rise, cars lined up outside gas stations in Cairo. The rise was highest for 80 octane gasoline, used mostly by old vehicles that still fill Egyptian streets, the price jumping 78 percent to 22 cents per litre. Diesel fuel has increased 64 percent to 25 cents a litre.
Food and energy subsidies traditionally eat up a quarter of state spending. The government is cutting subsidies in hopes of reviving an economy battered by more than three years of political turmoil.
Electricity prices up
Newly elected president Abdel Fattah al-Sisi has already raised electricity prices in efforts to reform energy subsidies, one of a range of politically sensitive subsidies that also cover transport, food and agriculture.
Electricity prices began to rise this month under a plan to eliminate power subsidies within five years, the electricity minister said on Thursday. Electricity prices are set to double over five years, but the introduction of a more graduated pricing structure aims to reduce the burden on the poor in a country where one person in four lives on less than $2 a day.
State finances have been decimated by more than three years of political turmoil, but the government is trying to improve them without provoking a backlash from Egyptians.
Egypt’s Finance Minister Hany Kadry Dimian announced deep cuts in energy subsidies in the 2014/15 budget that would save the government 40 billion pounds.
The revised budget seeks to reduce the deficit to 10 percent of gross domestic product in the next fiscal year, from an expected shortfall of 12 percent in the 2013/14 fiscal year.