New fuel prices to reduce budget deficit: Capital Economics

CAIRO – 1 July 2017: The recent fuel price hikes in Egypt will help the government make progress in reducing their budget deficit, London-based think tank Capital Economics said in a report published on 1 July.

“The cuts in fuel subsidies, estimated to be reduced from LE 145 billion in the fiscal year 2016/2017 to LE 110 million in 2017/2018, will cause a temporary lift in inflation levels by 1.5 percent, which may be boosted if the government pushes ahead with plans to raise electricity tariffs,” Middle East economist Jason Tuvoy stated.

Tuvoy expected inflation to ease over the next 12 to 18 months, which he said will lead to cutting interest rates after that period.

New fuel prices were announced Thursday as the price of 80-octane gasoline soared from LE 1.60 ($0.08) to LE 3.65 ($0.20) per litre, while 92-octane increased from LE 3.50 ($0.19) to LE 5.00 ($0.28) per litre.

The prices of natural gas for homes and butane gas cylinders were also raised by 50 percent and 100 percent respectively.