Egypt will be able to overcome economic crisis by 2025: PM

CAIRO – 3 January 2024: Prime Minister Mostafa Madbouli stated that the Egyptian state needs to utilize this year and part of 2025 to overcome the current economic crisis and return to the economic levels of 2021.

In televised remarks on Wednesday, Madbouli affirmed that the state would have reduced the debt percentage to less than 75 percent of the GDP if not for the global crisis, which led to an increase in inflation.

Madbouli stated that the state has managed to significantly contain the surging inflation by increasing subsidies, thereby reducing the burden on the people. However, the debt percentage has increased to 95 percent of the GDP over the past year.

He explained that the state has developed a clear plan for the next five years to gradually reduce the debt to less than 80 percent by boosting revenues and decreasing expenditure.

Madbouli emphasized that the main concern of the Central Bank of Egypt (CBE) is combating inflation and reducing its rates. He stressed that full coordination is taking place between the government and the CBE to reduce inflation to below 10% by 2025.

The premier highlighted the structural reforms being carried out by the state to ensure a strong economy capable of facing potential shocks. He emphasized the importance of unity in facing the current crisis.

Price Hikes

Madbouli commented on the recent electricity price hikes implemented by the government, stating that the decision will help decrease sector losses to LE 75 billion from LE 90 billion.

The cost of fuel used for electricity generation is purchased in US dollars, Madbouli explained, amid foreign currency shortages and economic pressures faced by Egypt in the past two years.

Madbouli clarified that the purpose of increasing some basic goods and services is to reduce the financial burdens on the state, emphasizing that continuation of these burdens would not be healthy for the Egyptian economy.

On Tuesday, the Ministry of Electricity and Renewable Energy announced a 16-26 percent increase in electricity prices, effective from January 2024. This follows recent decisions by the government to raise Metro prices by LE 1-2 and by Telecom Egypt, the country's primary telephone company, to raise household internet prices. Mobile companies have also introduced new pricing schemes.

Madbouli addressed the recent price increase for train and metro tickets, the first such increase in the past three years, stating that it aims to cover operation and maintenance costs.

Costly Subsidy Programs

Regarding subsidy programs, Madbouli stated that Egypt's annual diesel consumption reaches 18 billion liters, with the state subsidizing each liter at LE 5, totaling LE 90 billion per year.

He also mentioned that the state spends LE 35 billion per year on butane cylinder subsidies to cover the annual consumption of 280 million cylinders.

Furthermore, Madbouli highlighted the growing burden of bread subsidies due to unchanged bread prices. He noted that Egyptian citizens consume 275 million bread loaves per day, equivalent to 100 billion loaves annually, resulting in the state spending LE 91 billion on bread subsidies.