Egypt Raises Fuel Prices in Alignment with Economic Reforms
In alignment with its economic reform agenda, Egypt has taken a significant step by raising fuel prices. This move is part of a broader effort to fulfill commitments made to the International Monetary Fund (IMF) for securing loans critical for the country’s financial stability. The adjustments in fuel prices are aimed at closely aligning Egypt’s domestic rates with the fluctuating global energy market.
The decision to adjust fuel prices is rooted in an agreement that Egypt entered into with the IMF. In a letter of intent signed in November 2022, Egypt committed itself to several reform measures, including allowing most fuel prices to increase. This was intended to bring domestic prices in line with international standards and compensate for the previous year’s slower pace of adjustments. Despite these commitments, Egypt raised fuel prices only once after the agreement, occurring in March 2023.
Egypt’s relationship with the IMF had faced challenges, notably due to the country’s inability to meet specific commitments. These included timely fuel price adjustments, allowing more significant currency fluctuation, speeding up the divestment of state assets, and reducing government intervention in the economy. As a result, an earlier financial support agreement with the IMF had lapsed.
The recent adjustments have seen a notable increase in fuel prices. The prices have been raised by 1.00 Egyptian pounds ($0.02) per litre across various octane levels, with the new prices being 11.00 pounds for 80 octane, 12.50 pounds for 92 octane, and 13.50 pounds for 95 octane. Further, the price of diesel has been increased to 10.00 pounds from 8.25 pounds, and butane cooking gas prices have risen to 100 pounds per cylinder from 75 pounds. Additionally, the pricing committee has adjusted the price of fuel oil to 7,500 pounds per tonne but has kept prices stable for food industries and power plants at 1,500 and 2,500 pounds per tonne, respectively.
In response to the ongoing challenges, including those stemming from global conflicts that have significantly impacted Egypt’s economy, the IMF has expanded its financial support to Egypt. A new agreement proposes to increase the IMF’s financial assistance to Egypt to $8 billion. This support is crucial for helping the country navigate through the economic shocks and remain on a path of reform, including a significant devaluation of its currency to meet IMF guidelines.
It’s essential to note, however, that the IMF board has yet to meet and give formal approval to this new financial support agreement. The anticipation of this approval, however, reflects the international community’s continued support for Egypt’s economic reform efforts and the recognition of the challenges it faces.
The price adjustments and the deeper collaboration with the IMF mark critical steps in Egypt’s ongoing journey towards economic stability and growth. By aligning domestic fuel prices with international market rates, Egypt aims not only to fulfill its commitment to global financial partners but also to pave the way for a more resilient and prosperous economy.
