Egyptian government to impose price hikes to balance budget

The Egyptian government is readying the public for a hike in prices across various consumer markets due to the exacerbation of Cairo’s budget deficit and ongoing economic turmoil, according to The Arab Weekly plus agencies on July 7th.

Electricity prices in particular are expected by many to increase imminently, as local media reports various studies are seeking to gauge the scale and timing of the hikes.

Despite no official confirmation from state officials, the lack of denial potentially indicates they are testing how the public may receive the changes before fully implementing them. Egypt is undergoing a harsh cost of living crisis driven by steep inflation rates, a predicament which would make state-imposed price hikes a considerably painful burden to bear for citizens who are already struggling.

A price freeze on electricity rates was previously guaranteed by the Egyptian government which was expected to last until the end of the fiscal year in June. However, now in July, rates are being re-evaluated, reportedly due to a surge in reliance on expensive imports and a decline in domestic gas production.

In summer 2024, severe power outages were prevalent across the country, with daily cuts in some areas lasting up to four hours. The Egyptian government seems to prefer imposing unpopular tariff increases rather than forcing the nation to endure further outages. Officials claim that rapidly climbing temperatures and mounting industrial demand is stretching the national grid, making price hikes necessary to preserve a consistent energy supply.

These worries are compounded by Egypt’s ongoing annual water supply deficit, which have been further exacerbated by the completion of Ethiopia’s mega dam on the Blue Nile. The Egyptian government suspects that lopsided Nile water distribution policies may be imposed by the Ethiopian government, which would further harm an already crippled economy.

Public discontent is predominantly emanating from the widespread belief that the government is once more making citizens foot the bill for an easy resolution while viable alternatives exist. The Ministry of Electricity outlines that national grid theft costs the state roughly $600 million annually. Critics say that if this revenue were to be recovered, any need for price hikes would be offset.

Even though concerns are high, the Egyptian public are unlikely to protest as they continue to prioritise the preservation of social stability, especially in such an unstable region. Political scientist, Ikram Badr el-Din told The Arab Weekly: “people understand that security is a priority, and they’re prepared to bear a share of the burden, but they need space to breathe.”

Opposition figures warn that the government is playing a risky game, urging it to reconsider the imposition of blanket public spending cuts and instead broaden its social security initiatives. Many are sceptical of the roll out of new pension increases, salaries, and cash transfers, suspecting it merely lays the groundwork for a new austerity regime.

Many suspect that these policies of continuous price increases – especially for subsidised goods – are driven by pressure on the government to meet International Monetary Fund (IMF) conditions and maintain foreign investor confidence in the economy. Critics argue that the most economically vulnerable in Egyptian society are paying the price to uphold macroeconomic discipline.

However, frustration is growing beyond IMF directives. Cigarette prices have recently increased, causing frustration among millions of Egyptians who view smoking as an affordable respite from the stresses of every day life. The Egyptian government stated that the additional revenue will be directed to fund health and education, but the move was seen by many as tone-deaf at a truly challenging time.

Most Egyptians are preparing for a further squeeze on their personal finances. However, there are growing worries that the perpetuation of consumer price hikes as the sole strategy to confront every fiscal emergency risks triggering something more severe than quiet discontent. One observer stated: “there’s only so long people can be asked to carry the weight of the state’s stability.”

The Arab Weekly plus agencies, Maghrebi.org