-How will the state face the cons of price hikes?
The state has already adopted a number of compensatory measures and procedures which aim at alleviating the effects of energy price hikes. The state has provided a social subsidy to two categories.
The first category, which includes those who are addressed by the Civil Service Law, will receive a 7% periodical incentive, and a 7% exceptional incentive with a minimum of L.E. 65, to face price hikes.
The second category, which includes those who are not addressed by the Civil Service Law, will receive a 10% periodical incentive, and a 10% exceptional incentive with a minimum of L.E. 65, to face price hikes.
The state has also increased supply subsidies from L.E 15 to L.E 18 to L.E 21; a 150% increase.
Hence, each member of a family will receive a 50-pound subsidy on supplies monthly, in addition to a 300-pound increase of wages.
-Are annual price hikes necessary?
Price hikes are not related to a fixed time; however, they are related to global oil prices.
The recent global increase in oil prices led to increasing oil prices in Egypt again.
Each 1-dollar-increase per oil barrel costs the state budget 4 billion pounds.
In spite of the recent increase, the state’s oil subsidy in the 2018-2019 budget will reach L.E 105-billion.
This confirms that the energy subsidies reform doesn’t aim at lifting the state’s support, but aims at achieving rationalization and alleviating the budget’s deficit.
-Why did the state wait that long to cut subsidies long time ago?
Unfortunately, if the state had cut subsidies long time a go, there wouldn’t have been a problem nowadays.
For the past 15 years, the state hasn’t been able to face the problem of subsidies, an issue which led to budget deficit.
Hence, Egypt turned from an oil exporter to an oil importer country, leading to the emerge of oil and butagas black markets.
Each new cabinet was afraid of taking such measure in order to prevent the anger of Egyptians; however this led to the aggravation of the problem.
-Will subsidy cuts and price hikes solve the problem?
Energy prices increase does not mean that the state will lift all subsidies, because the government is obliged to provide support to those who have limited income.
What really happened is that the state’s support didn’t reach those who need really need it, that’s why the whole system had to be changed.
-How to solve the subsidy problem?
In order to solve the subsidy problem, the state has to deliver the support to those who really need it.
-What does the term energy subsidies mean?
It is a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.
-Egypt is the only country which increases prices that frequently!
This is not true. Egypt is one the countries which took these reform measure very late. Some countries like Jordan, have a special monthly pricing system, according to which prices may vary each month.
-Does the subsidy system in Egypt achieve its targets?
The subsidy system in Egypt suffers from a lot of problems, topped with the lack of a data base which determines those who really need support.
An accurate data base is necessary to deliver the subsidies to the needy, hence cutting the budget deficit and decreasing the state’s public debt.