With the economy reeling from more than three years of political
turmoil, Salame says the reform couldn't have come at a worse time.
It cost him 80 Egyptian pounds ($11.19), double the usual amount, to
run his 12-seater microbus on Saturday when the price rise was
"I have five kids, God only knows how I can pay my rent this month,"
said Salame, 44, furious over the move which raised the price of
gasoline, diesel and natural gas by up to 78 percent.
The government's decision to slash energy subsidies is being
applauded by economists who say it is an unavoidable step towards
curbing state spending in the country where the deficit is running
at 12 percent of gross domestic product.
But big industrial companies warn the price hikes will erode their
And on the streets of Cairo, the economic logic is lost on taxi and
bus drivers whose anger points to the political risk.
They are already hiking fares - some are charging double for a short
ride - underlining the inflationary impact of a decision that seems
likely to drive up prices in an economy where cheap fuel helps to
suppress prices of almost everything.
Passengers used to paying 2 pounds per bus ride are resisting
demands for higher fares, triggering rows in Cairo's heavily
congested streets where tempers already snap easily.
"I was wrong when I voted for Sisi. We are the poor of this country
and the decision makers are putting a sword's blade to our throats,"
Sisi, the former army chief who deposed Mohamed Mursi of the Muslim
Brotherhood last year, has been signaling the need for austerity. A
fifth of the state budget goes on subsidizing fuel.
Prime Minister Ibrahim Mehleb sought to justify the cuts in a
televised news conference on Saturday, saying they were needed to
fix the economy. Some of the money saved would be spent improving
education and health services, he said.
"How can I achieve social justice while I am subsidizing the rich at
the expense of the poor?," he said, echoing a view that the
wealthier Egyptians benefit most from state-subsidized fuel.
He envisions cuts slicing 50 billion pounds from government spending
in the coming 12 months.
Despite the fuel price rise, the government will still be spending a
hefty amount subsidizing fuel and electricity. The budget for the
coming 12 months sees 16 percent of state spending going on energy
Sisi said the price increases were needed to keep the country's debt
crisis from getting worse.
"[The decisions] needed to be taken now or later, so it is better to
confront [the problem] rather than leave the country to drown if we
delayed longer than this," he said in comments to a state-run
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The higher prices mean industries that have benefited from cheap
fuel will have to pay prices closer to world rates.
The fuel used by cement factories, for example, is now going to cost
a third more, industry sources said.
Ahmed Abou Hashima, chief executive of Egyptian Steel, said the step
would strip Egyptian industry of a competitive advantage.
"I ask the government ... to look at how they can protect local
industry, for example by anti-dumping tariffs," he said.
Some Egyptians, often those who can afford to absorb higher prices,
are sympathetic to the government's move.
Overhearing one driver complaining about the hike, a young man lent
through the window of the parked vehicle to defend Sisi. "We are in
an economic war," he said.
But that logic holds little sway for many in a country hooked on
subsidies for decades. Taxi drivers held protests in the cities of
Suez and Ismailia on Saturday.
Sayyed Abdullah, a 40-year-old taxi driver, said he became embroiled
in a physical fight with one passenger in Cairo who refused to pay
the amount he had asked for his ride.
"At first I was optimistic when Sisi won. I hoped there would be
security and that we will have work," he said.
"Now I see that the country heading in an unknown direction."
($1 = 7.1501 Egyptian Pounds)
(Editing by Tom Perry and Sophie Hares)
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