Ibrahim Sayed, a factory worker with two school children was shocked when the microbus driver asked him for two Egyptian pounds (US $0.28) to travel to work— double what he used to pay.
Ibrahim Sayed, a factory worker with two school children was shocked when the microbus driver asked him for two Egyptian pounds (US $0.28) to travel to work— double what he used to pay.
“Drivers of microbuses and service cars don’t follow the set tariff. They take much more,” Saywed said, lamenting that poor Egyptians like him have suffered the most from the government’s July 4 decision to raise fuel prices and partially cancel power and fuel product subsidies.
“May God have mercy on us in the coming days,” said Sayed.
Huge price increases
The price of octane gas went up 78% and diesel 64%. Partial cancelation of subsidies on fuel products has led to higher public transportation fees, which in turn has increased food prices, especially products being transported from one governorate to another.
The government justified its decision by describing a rescue plan for the country’s severe economic crisis.
Slump in the transportation business
“Now, no one can afford to take a taxi,” said taxi driver Mustafa Ahmed. “People are worried about this increase and our work has virtually stopped.”
Ahmed now pays nearly double to fill his tank and even the raised fares don’t make up for the fuel prices.
Inappropriate timing
Economic experts believe that the timing of this decision was inappropriate. Faraj Abdulfattah, a professor of economics at Cairo University, said the government did not consider the difference between the prices of 95 Octane Gasoline and 80 Octane Gasoline whose increase should have been less since numerous old cars and microbuses depend on it.
Abdulfattah said current increases must be reconsidered to prevent aggravating the crisis even further.
“Despite the difficult and terrible economic situation in Egypt, the subsidies issue requires radical and bold solutions. The latest increase of fuel prices was a shock to the poor and the low-income people,” he underlined and added that the government did not consider the fact that fuel prices remained frozen for a very long time and, thus, the increases should have been gradual and without including the prices of electricity and gas for the time being.
Abdulfattah also criticized the government for failing to find a package of alternatives such as providing subsidies for public transportation means including microbuses, trains and metro trains through increasing their trips without increasing their fees.
Ahmed Ghoneim, who heads the Economic Research Center, elaborated on the same opinion. “The decision to raise fuel prices will have negative impacts in the coming days due to its unsystematic enforcement and discard of its social negative impacts.”
He also added that price increase rates of the different products on the market cannot be predicted at this stage, but the inflation rates will definitely rise.
Lip service to the poor?
Mustafa Mohamed, a taxi driver, questioned the authenticity of President al-Sisi’s campaign promises to address the problems of the poor.
“We elected el-Sisi to champion our cause as poor people. Does he want the people to maltreat and fight each other, stage protests and die in the streets again? Or does he want us to live peacefully?”
Step to reform economy
On the other hand, some analysts believe that the decision is a necessary step to reform the economy and cut the budget deficit rather than an indicator of imminent bankruptcy.
Rashad Abdo, economic expert and Head of the Egyptian Forum for Economic and Strategic Studies, said Egypt is suffering a budget deficit which is increasing every year along, with debts which cornered the government to take such a decision to cut the budget deficit and the national debt. He added that the government is planning to cancel subsidies within the next five years.
Abdo acknowledged that ordinary people will suffer and called upon the government to give the people enough guarantees so that the situation will not be exploited by the private sector. He additionally underlined that a profit margin should be set to face the expected price increases that will follow this plan.
Economic expert Mohamed Joneidi, however, believes that some decisions should have been issued prior to this one. He said it would have been wiser to cancel 50% of subsidies for high power-consuming factories such as cement and fertilizers. He also stressed that tax evasion should be controlled as it wastes 80 billion Egyptian pounds (US $11 million) of returns annually, and the private funds also waste tens of billions of returns unjustifiably.
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