July 5, 2019 / 7:52 AM / a month ago

UPDATE 3-Egypt hikes domestic fuel prices as it rounds off subsidy reform

* Rises of 16-30% bring most prices in line with cost

* Subsidy cuts are key part of IMF-backed reforms

* Austerity has squeezed ordinary Egyptians (Adds quotes, details, analyst comment)

By Ahmed Ismail and Aidan Lewis

CAIRO, July 5 (Reuters) - Egypt introduced its latest round of fuel subsidy cuts on Friday, raising domestic prices by between 16% and 30% to bring them into line with their real cost, as it nears the end of an IMF-backed economic reform programme.

Scaling back fuel subsidies that have been a strain on the budget for decades was a key plank of a three-year, $12 billion reform package signed with the International Monetary Fund in 2016, as Egypt’s economy struggled to recover from the turmoil that followed its 2011 uprising.

But the changes will push up prices for transport, food products and other goods, adding to economic pressure on Egyptians who have already lived through several years of austerity.

The government had told the IMF it would remove subsidies entirely from most fuel products by June 15 after increasing fuel prices steadily over the past four years.

It did not explain the delay, but austerity measures are politically sensitive and have dented the popularity of President Abdel Fattah al-Sisi.

The government broadcast messages this week explaining why the price rises were needed. Sisi has repeatedly told Egyptians that austerity is the price for greater economic stability.

Energy subsidies had eaten up as much as 20 percent of the government’s budget in recent years.

Starting at 9 a.m. (0700 GMT), the price of widely used 92 octane grade petrol rose by 18.5% to 8 pounds (48 U.S. cents) a litre, and diesel rose by 22.7% to 6.75 pounds.

The price of cooking gas cylinders rose by 30% to 65 pounds for domestic use and 130 pounds for commercial use.

Most fuel prices are now in line with their costs, though the government is still subsidising fuel for bakeries and power generation, a petroleum ministry official said.

The official confirmed the government would link domestic fuel prices to international market prices in September. It introduced a similar indexing mechanism for 95 octane gasoline in April.

TRANSPORT PRICES UP

Some taxi and rickshaw drivers in Kafr al-Sheikh governorate, north of Cairo, had already raised tariffs on Friday. The prime minister’s office said it was ordering minibuses and taxis to raise fares by 10-15% across Egypt.

Analysts had speculated that officials would wait until after the end of the continental soccer championships, which Egypt is hosting until July 19, before announcing the price rises.

“We were expecting an increase after the end of the African Cup of Nations, but it seems the government no longer expects any reaction from the people,” said Ibrahim Amin, a teacher in the town of Kafr al-Sheikh.

Though inflation has been easing since 2017, the headline figure was still 14.1% in May.

“The price rises will crush us,” said 32-year-old Saleh Awadhi in Alexandria. “The prices of everything will increase because of the rise in petrol and diesel, and that will affect ordinary citizens.”

Egypt’s economic reforms since 2016 have included a sharp devaluation of the pound and the introduction of a value-added tax.

The measures have improved macroeconomic indicators but have increased the financial strain for tens of millions of Egyptians, many of whom live in poverty.

The economy has been boosted by investment in the oil and gas sector and a recovery in tourism revenues, but non-oil foreign direct investment has been falling and economists say a lack of structural reforms is hampering broader-based growth. ($1 = 16.5800 Egyptian pounds) (Additional reporting by Mohamed Abdellah Writing by Aidan Lewis and Nadine Awadalla Editing by Catherine Evans)

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