- Author, Hisham Al-Mayani
- Role, BBC-Cairo
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5 hours ago
“Recently, we have started paying in installments for the diesel used to operate irrigation machines for our agricultural lands, and we are unsure about what to do next?” This statement from Gamalat Lotfy, a farmer from a small village south of Giza, reflects the concerns following the Egyptian authorities’ decision to increase fuel prices, effective Thursday.
The increase ranges from 10% to 15%, as reported in the official gazette, and the decision was made just days ahead of the third review by the International Monetary Fund of the country’s $8 billion extended loan program.
As per the Ministry of Petroleum, the price of 80 octane gasoline has risen from 11 to 12.25 pounds ($0.25), 92 octane gasoline from 12.5 to 13.75 pounds, and 95 octane gasoline from 13.5 to 15 pounds.
Diesel, a commonly used fuel, saw a sharper rise, now priced at 11.50 pounds ($0.24), up from 10 pounds.
Gamalat expresses that the costs of diesel and oils used to run irrigation and agricultural machinery have doubled in the past decade, exceeding her capacity to pay outright.
When President Abdel Fattah el-Sisi took office at the end of May 2014, diesel cost 110 piasters. A 63% increase was approved in June of that year, raising the price to 180 piasters. This trend of increasing prices persisted, resulting in a current diesel price exceeding 11.5 pounds.
Black market for fuel
According to Gamalat, irrigating one acre during the season requires between 200 and 600 liters of diesel for water pumping until it reaches the agricultural land, particularly in areas experiencing water scarcity.
She highlights the existence of a black market for diesel in the villages, where merchants dictate prices whenever there is a diesel shortage, leaving farmers with no alternatives.
Comment on the image, Expectations of a new rise in food prices
Official prices are just ink on paper.
Mohamed Rizk, a fruit and vegetable shop owner in a Cairo neighborhood, told the BBC: “These fuel price increases will undoubtedly lead to significant price hikes for vegetables and fruits. Farmers will be compelled to raise the price of their crops due to increased production costs, not to mention the rising transportation expenses.”
He added that in recent years, “the prices of fruits and vegetables specifically have seen unprecedented hikes, leading to a scarcity in purchasing activity, and we remain uncertain about the future.”
“Microbus drivers, a major mode of transportation in Egypt, have increased fares unjustifiably in recent days, well beyond government-set prices, even prior to the latest gas price hike,” said university student Walaa Adel. “This has doubled the burden on those reliant on this mode of transport with no alternatives available.”
Any increase in fuel prices sanctioned by the government is typically followed by governors issuing official percentage hikes for local transportation fares. However, citizens complain that these sanctioned prices are merely “ink on paper” and are seldom adhered to, particularly during the initial period of implementation.
What about previous increases?
“These price hikes impact our livelihoods,” taxi driver Mohammed Falsto shared with the BBC. “We are forced to raise ride prices, which deters people from using our services, ultimately harming everyone involved.”
Falsto expressed surprise at the Prime Minister’s statement regarding the government’s obligation to raise fuel prices over the next eighteen months, questioning: “What about all these increases in past years? There hasn’t been a year free from one or two price hikes.”
Egyptian Prime Minister Mostafa Madbouly announced during a press conference on Wednesday that his government plans to raise petroleum service prices in the next eighteen months until the end of next year, asserting that this would be done gradually to avoid inflating rates or exacerbating citizens’ burdens.
Image source, Facebook official page
Significant increases over the past ten years
Since the beginning of Sisi’s presidency, fuel and petroleum product prices have risen more than 21 times, with 10 of those increases affecting diesel and gasoline.
In 2019, Egypt implemented an automatic fuel pricing mechanism, overseen by a committee of specialists that meets every three months to review global fuel prices, deciding whether to fix, increase, or decrease prices in Egypt. However, the committee has sanctioned a price reduction only twice during the COVID-19 pandemic in 2020 and 2021, and by limited amounts. Prices have been fixed occasionally, but increases have been approved more frequently for various petroleum products.
During his tenure, former President Hosni Mubarak refrained from raising fuel prices, but in 2008, price increases for gasoline and diesel were authorized, with increments ranging from 40 to 65 piasters. Thus, the price of 92 gasoline rose to 185 piasters from 145 piasters, while 95 gasoline increased to 275 piasters from 175 piasters, and diesel was priced at 105 piasters, up from 70 piasters, although 80 gasoline, predominantly used in taxis and transportation, remained unchanged.
Fuel prices remained stable during the Military Council’s rule, as well as during the presidency of the late Mohamed Morsi and the interim presidency of Adly Mansour.
The latest price hike marks the second in 2024, following an increase last March, which occurred just two weeks after a significant devaluation of the Egyptian pound against the US dollar due to the ongoing economic crisis.
Wrong decision at wrong time
Economic analyst Abdul Nabi Abdul Muttalib remarked to the BBC, “The recent decision to raise fuel prices is ill-timed, as all indicators suggest a global decline in fuel prices; thus, the government lacks logical justifications for these increases.”
He added, “The International Monetary Fund’s conditions are the driving factor,” warning that this could widen the “trust gap” between the government and the citizens, who may feel that these decisions are driven by external pressures rather than national economic needs.
The IMF estimated in April that Egypt’s fuel subsidies must diminish from EGP 331 billion ($6.8 billion) in fiscal year 2023-24 to EGP 245 billion ($5.1 billion) in 2024-25.
Some attribute the increases in fuel prices to Egypt’s desire to meet IMF requirements in exchange for securing the sought-after loan, with Cairo having reached an agreement with the IMF this past March to raise the value of its loan to $8 billion from the previously set $3 billion in December 2022, as part of a financial package from various international institutions aimed at helping Egypt address its economic challenges, specifically the currency shortage crisis.
Image source, AFP
This decision followed successive flotation measures by the Egyptian government since late 2022, which led to the Egyptian pound losing around two-thirds of its value, along with other actions related to increasing fuel prices and reducing subsidies on food items, in line with the IMF’s requirements.
The Fund postponed the third review of Egypt’s extended loan program, initially scheduled for the 10th of this month, to the 29th. This delay was believed to result from the Fund’s dissatisfaction with Egypt’s not meeting its conditions, prompting the Egyptian government to preempt this review by raising fuel prices.
Abdul Muttalib emphasized that the decisions to raise fuel prices will inevitably lead to a simultaneous rise in the prices of other goods and services, as fuel is integral to nearly all sectors including production and transportation.
He pointed out that, based on current indicators, the government may soon reduce the pound’s value against the dollar once more, “in accordance with the IMF’s conditions which deem the current exchange rate unfair.”
Global prices are the reason!!
Khaled Othman, Assistant Minister of Petroleum and Mineral Resources of Egypt, stated that several factors compelled the Automatic Pricing Committee for Petroleum Products to raise gasoline and diesel prices.
Local media reported that Osman explained, “Global events and geopolitical tensions, such as those in Gaza and Sudan, along with the fluctuations in exchange rates, have significantly elevated costs.”
He indicated that the subsidy for diesel has nearly doubled to 20 pounds per liter and noted that neighboring countries charge over 35 pounds for diesel, while its price in global markets is around 34 pounds.
Osman stated: “The daily subsidy for diesel results in a loss of 450 million pounds for the state daily; when including subsidies for gasoline and fuel provided for electricity, total subsidies surpass one billion pounds daily, which is an alarming figure.”
An unnamed Egyptian official told media that the government aims to save 36 billion pounds through the recent hike in fuel prices, but observers caution that the losses in production sectors will exceed this figure significantly.
The increase is long overdue.
Mohamed El-Geblawy, a member of the Egyptian parliament’s energy committee, told the BBC: “The pricing committee approved fuel price hikes based on a review reflecting global fuel price increases, and the Egyptian state must align with these global trends.”
Al-Jablawi downplayed the potential effects of the new increases on the current situation, stating, “While some exploit this increase to inflate the prices of transport and food goods, the government is compelled to closely monitor these actions.”
He concluded that “this increase has been postponed for a considerable time due to public unrest over the substantial rises in the prices of goods and services; however, this adjustment was necessary.”
Rising Fuel Prices in Egypt: Impact and Reactions
Egyptian Agriculture in Distress
“Recently, we have resorted to paying in installments for the diesel we use to operate the irrigation machines for agricultural lands, and we do not know what to do now?” This statement from Gamalat Lotfy, a farmer from a small village south of Giza, reflects a growing concern among Egyptian farmers following the recent increase in fuel prices. The government’s decision to raise fuel prices, which took effect recently, has sparked uncertainty among agricultural workers, especially as they face heightened operational costs.
Fuel Price Increases Explained
The official fuel price hikes ranged between 10% and 15%, according to the official gazette. Here are the revised prices:
- 80 Octane Gasoline: Increased from 11 to 12.25 pounds ($0.25) per liter
- 92 Octane Gasoline: Increased from 12.5 to 13.75 pounds per liter
- 95 Octane Gasoline: Increased from 13.5 to 15 pounds per liter
- Diesel: Increased from 10 to 11.50 pounds ($0.24) per liter
Historical Context of Fuel Prices
Over the past decade, the price of diesel has more than doubled. In 2014, when President Abdel Fattah el-Sisi took office, diesel was priced at just 110 piasters, with a significant price hike in June of the same year. By 2024, prices have skyrocketed, raising concerns about sustainability for farmers like Lotfy.
Rising Operational Costs for Farmers
Jamalat Lotfy highlights another critical issue: the rising costs of diesel fuel and oils used for irrigation machinery and various agricultural tasks have doubled over the past ten years. Farmers require between 200 to 600 liters of diesel for irrigating one acre throughout the season. With ongoing fuel price increases, farmers are straining to afford these costs.
Black Market Emergence
With the pressures of fuel shortages, a black market for diesel has emerged in rural areas. Farmers are compelled to purchase diesel at inflated prices set by local merchants when official supplies are low, further burdening their finances and exacerbating the crisis.
Impact on Food Prices
The ripple effect of increased fuel prices is already clear in the markets, with food prices on the rise. Mohamed Rizk, a fruit and vegetable vendor in Cairo, stated, “These increases in fuel costs will certainly lead to significant increases in the prices of vegetables and fruits.” He added that farmers would have to inflate the agricultural crop prices to cover their heightened production and transportation costs.
Transportation Costs and Public Response
The transportation sector is feeling the heat as well. Walaa Adel, a university student, noted that microbus drivers, a critical mode of transport in Egypt, have already begun to raise their fares beyond government-mandated levels. “This has doubled the burden on many who have no alternative,” she remarked.
Previous Increases and Public Sentiment
Taxi driver Mohammed Falsto voiced concerns that these continuing fuel price increases adversely affect their livelihoods. “We have to increase the price of the ride, which makes people reluctant to ride with us,” he said. The sentiment among citizens indicates a growing dissatisfaction with the government’s decisions, especially as fuel prices have steadily increased 21 times since 2014.
Future Predictions
The Egyptian government is under mounting pressure to manage inflation while negotiating with the International Monetary Fund (IMF) regarding its $8 billion loan program. Prime Minister Mostafa Madbouly indicated that further price increases might be forthcoming. He claims the government intends to implement these adjustments gradually to avoid further strain on the public.
Policy Analysis: Fuel Pricing Mechanisms
In 2019, Egypt introduced an automatic fuel pricing mechanism designed to adjust prices quarterly based on global fuel prices. However, this system has predominantly resulted in increases rather than decreases. Out of the 21 price revisions since the initiation of this mechanism, only twice have reductions occurred.
Global Context and Domestic Justifications
Economic analyst Abdul Nabi Abdul Muttalib criticized the timing of the recent fuel price increase, especially as global fuel prices show signs of decreasing. He attributed the price hikes partly to the requirements imposed by the IMF to secure funding for Egypt’s economic recovery. Observers note that the IMF has projected a significant reduction in subsidies, further complicating the situation.
Government’s Perspective
Khaled Othman, Assistant Minister of Petroleum and Mineral Resources, cited global events and economic factors—including geopolitical tensions in the region—as reasons for the price hikes. He highlighted a troubling statistic: the state loses 450 million pounds daily due to diesel subsidies alone.
Summary of Fuel Price Increases (Table Format)
| Fuel Type | Previous Price (EGP) | New Price (EGP) | Increase (EGP) | Percentage Increase |
|---|---|---|---|---|
| 80 Octane Gasoline | 11 | 12.25 | 1.25 | 11.36% |
| 92 Octane Gasoline | 12.5 | 13.75 | 1.25 | 10.00% |
| 95 Octane Gasoline | 13.5 | 15 | 1.5 | 11.11% |
| Diesel | 10 | 11.5 | 1.5 | 15.00% |
Economic Outlook: Long-Term Effects
As these price adjustments take root, both citizens and analysts express apprehensions about rising inflation. Abdul Muttalib warned that any increase in fuel prices inevitably leads to price hikes in other goods and services, given the integral role fuel plays in production and transportation.
Observations indicate that the Egyptian government faces formidable challenges as it navigates domestic pressures while fulfilling international obligations. The ongoing fuel price increases and their implications for food supply chains underscore the complexity of Egypt’s economic landscape and the urgent need for sustainable practices in agriculture and public transport.
Community Response and Coping Strategies
Amidst these challenges, many Egyptians are exploring alternative means of transportation and looking for ways to secure resources at lower costs. Community resilience is tested as citizens adapt to the new realities presented by the economic climate, but the government’s transparency and effectiveness in addressing public grievances will be pivotal in shaping the future landscape of Egypt’s economy.
In summary, the rising fuel prices in Egypt represent a multifaceted crisis impacting agriculture, transport, and public sentiment. The unfolding situation calls for comprehensive strategies to alleviate the economic strain on citizens while ensuring sustainable development in the sector.
