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Egyptian consumers get rude awakening

Friday, November 04, 2016 - 01:43

Egyptians refuelling their cars faced price hikes at the pump of up to 47 per cent after the central bank floated the Egyptian pound. Ivor Bennett reports on the aftershock of a move that may please the IMF - if not hard-pressed consumers.

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For Cairo's early risers, it was a rude awakening. Diesel up by 30 percent Some petrol by nearly half, overnight. (SOUNDBITE) (Arabic) TAXI DRIVER, ATEF, SAYING: "This happened all of a sudden. I drove into the gas station to fill up my tank, as usual, and I swear I never expected this nor did I prepare for it." Sudden yes but not entirely unexpected. Food and energy subsidies account for a quarter of Egyptian state spending. And the government's been saying it wants to cut them since 2014, when prices were increased by nearly 80 percent. (SOUNDBITE) (Arabic) ENGINEER, AHMED SABRY, SAYING: "It's very normal in countries around the world to not have subsidized gas, we need to realise this and admit this, and Egypt has to start working (and developing)." This latest hike was triggered by the floating of the Egyptian pound. Pegged at 8.8 to the dollar since March, it's now at 13. (SOUNDBITE) (Arabic) TAXI DRIVER, ATEF, SAYING: "I bet you anything that from this increase in prices of gas, the price of everything else will increase 200 or even 300 percent." But it's also hoped it'll attract foreign investors. Years of political turmoil have kept their dollars at bay, resulting in an artificially strong currency. A more flexible rate is one of the conditions of a 12-billion-dollar IMF loan. SOUNDBITE (English) JANE FOLEY, SENIOR FX STRATEGIST, RABOBANK, SAYING: "This is going to have quite a hard economic impact to many people in Egypt in the short-term but the IMF do see this as a very necessary reform to make the Egyptian economy far more competitive over the medium and longer runs." For many, though, things are likely to get worse before they get better.

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Egyptian consumers get rude awakening

Friday, November 04, 2016 - 01:43