Egypt Reels From Second Price Hike in Week as Power Subsidy Cut

(Bloomberg) -- Egypt on Thursday raised household electricity prices by as much as 42 percent, in a move likely to further anger a population already struggling with soaring costs.

The increases, which include ending subsidies entirely for the highest power consumers, were widely expected as officials push ahead with reforms they have described as painful but long overdue. Yet coming a week after the government sharply raised fuel prices, the half of Egypt’s 93 million people who live near or below the poverty line face greater hardship.

Briefing reporters in Cairo, Electricity Minister Mohamed Shaker said the move was expected to lower the electricity subsidy bill to 52 billion pounds ($2.9 billion) from 82 billion pounds. Earlier plans to scrap all power subsidies by 2019 would now be delayed until 2021, he said. The administration of President Abdel-Fattah El-Sisi is looking to cut spending as it aims to trim the fiscal deficit to the equivalent of 9 percent of gross domestic product this fiscal year.

Egypt agreed to trim subsidies and expenditure as part of a broader program to secure a $12 billion International Monetary Fund lifeline seen as critical to winning foreign investor confidence. But the bailout also weakened the pound by half against the dollar and caused inflation to soar to about 30 percent -- the highest level in decades.

Electricity prices for commercial enterprises were raised by between 22 percent and 44 percent, depending on usage tiers, according to a statement distributed by the minister.

Under the revised payment structure, Egyptians who consume below 50 kilowatts of electricity will see prices rise 18 percent, to 0.13 pounds per kilowatt, Shaker said. Prices for the second-highest usage tier of 651 to 1,000 kilowatts go up almost 32 percent to 1.25 pounds per kilowatt. The nation’s highest consumers will see bills rise by 42 percent.

In an effort to offset the impact of the reforms, the government has raised pensions and salaries for civil servants, while also allowing holders of ration cards to obtain more of their essentials at subsidized rates.

To contact the reporters on this story: Tarek El-Tablawy in Cairo at teltablawy@bloomberg.net, Abdel Latif Wahba in Cairo at alatifwahba@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Mark Williams, Stuart Biggs