Egypt to raise electricity prices before election

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Egypt to raise electricity prices before election

Post by DJKeefy » Mon Apr 14, 2014 2:12 pm

Egypt plans to boost electricity prices for the richest 20 percent of its citizens before the presidential elections at the end of May, as the country has 'no time to waste' in starting reforms, the planning minister said.

Ashraf al-Arabi, Egypt's minister of planning and international cooperation, this week said the decision on raising gasoline prices will be taken "very soon," but declined to provide further details.

Al-Arabi's sense of urgency suggested that for the first time in years, Egypt was on the same page with the International Monetary Fund, which has long urged the country to push through structural reforms, such as gradually reducing costly subsidies.

After the 2011 uprising that toppled Hosni Mubarak, already high energy subsidy costs ballooned to a fifth of state spending as the Egyptian pound plunged, making imports more expensive.

Egypt's finance minister said last month that spending on energy subsidies next year would be 10-12 percent above the 130 billion Egyptian pounds ($19 billion) budgeted for, unless immediate reforms are made.

"This energy subsidy system is unsustainable; we cannot afford (for) this to continue," al-Arabi said in an interview on the sidelines of the IMF-World Bank meetings in Washington.

"We don't have time to waste. ... It's better for Egypt to start some of these measures at least before the presidential election, just to pave the way for the coming president, to make his life easier," he said.

Al-Arabi declined to specify by how much electricity prices would rise, saying the issue was still under negotiation. He also emphasized the price hikes would be gradual, and could take three to five years to implement in full.

He said the government had agreed to allocate at least 15 percent of its subsidy savings to social programs and the poor.

"This will benefit the poor, because we will take this from the rich and reallocate it to the poor and social spending," he said. "So I believe we have a good story to tell to the Egyptian people."

Egypt sells many energy products at prices substantially below the cost of production. But one cash-strapped government after another has resisted attacking the wasteful system, fearful that raising fuel prices could spark unrest.

The previous government of Mohamed Morsi was already trying to cut spending to contain a ballooning budget deficit, and was in negotiations with the IMF for a loan program that would have required Egypt to raise taxes and cut subsidies. But negotiations were never completed before Morsi was toppled last July.

Since then, Egypt has relied on billions of dollars in aid from the Gulf Arab states of Saudi Arabia, United Arab Emirates and Kuwait.

"What I think Egypt should do is use continued Gulf support to create a breathing space, so that reform can be gradual, and you're not forced into abrupt reforms by running out of money," Christopher Jarvis, the IMF's mission chief for Egypt, said in an earlier briefing with reporters.

"I think the sooner reform is started, the better. But I see it as a process that will take several years," he added.

Al-Arabi said Egypt plans to raise gas prices "very soon," declining to elaborate further.

He said the government will make a bigger push to distribute smart cards for fuel, part of a program to cut costs for the heavily subsidized commodity by reducing so-called "leakages," or smuggling and selling of gasoline on the black market.

The government in October said it would print 5 million smart cards to give to motorists, who would use them to buy gasoline and diesel at fuel stations, allowing the government to track and monitor deliveries.

A smart card company contracted for the project alleged earlier this month that the Egyptian government was taking too long to roll out the system.

Al-Arabi said only 2 million or so cards have been distributed so far, and the government plans to distribute the remaining cards in the next two to three months.

"Once we have this smart card system, we will save at least 15 to 20 percent on leakages in the system," he said.

Egypt on Sunday also said it plans to introduce a smart card system for subsidized bread by July.

Egyptians will vote on May 26-27 in a presidential election where Abdel Fattah al-Sisi, the former army chief who deposed Morsi, is expected to win easily.

Al-Arabi said any of Egypt's presidential candidates would support moving forward on subsidy reforms and other changes to the economy.

"The Egyptian challenges are well known to everybody," he said. "We keep talking about these same problems, at least in the last 30 or 40 years. ... It's time to reform."

Source: http://english.ahram.org.eg/News/98996.aspx


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Re: Egypt to raise electricity prices before election

Post by Who2 » Mon Apr 14, 2014 2:22 pm

That's jolly good, but for the last 30 years people here have stole electricity, the poor, the rich even the so-called officials of 'law and order, oh! and ex-pats, So, does one really think anything will change ? smart cards ? really that should create for one load of fun... :cool:
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Re: Egypt to raise electricity prices before election

Post by A-Four » Mon Apr 14, 2014 3:09 pm

This whole essay is a joke from start to finish. I have never come across a nations financial problems, that are so serious as Egypt now faces, except for those that are recovering from recent civil war.

Anyone on here who thinks that new taxes will only effect the top 20% must be crazy.

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Re: Egypt to raise electricity prices before election

Post by Dusak » Mon Apr 14, 2014 3:19 pm

All it will mean for those paying the extra [us?] is that they will receive more expensive power cuts. Raising the price will not raise the supply available.
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Re: Egypt to raise electricity prices before election

Post by Brian Yare » Mon Apr 14, 2014 3:20 pm

A-Four wrote:This whole essay is a joke from start to finish. I have never come across a nations financial problems, that are so serious as Egypt now faces, except for those that are recovering from recent civil war.

Anyone on here who thinks that new taxes will only effect the top 20% must be crazy.
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Re: Egypt to raise electricity prices before election

Post by newcastle » Mon Apr 14, 2014 3:33 pm

Dusak wrote:All it will mean for those paying the extra [us?] is that they will receive more expensive power cuts. Raising the price will not raise the supply available.
The power supply problem is a separate issue. This is designed to raise revenue/cut subsidy.....with some of the benefit being redirected to health, education etc, benefiting the poorer. Or maybe they'll raise the unit price per KwH consumed above a certain threshold..again targeting the bigger consumers (likely to be richer).

There will, of course, be a knock-on effect for everyone.

Rushing it through before Sisi is elected seems a little transparent :lol:

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Re: Egypt to raise electricity prices before election

Post by Glyphdoctor » Mon Apr 14, 2014 5:33 pm

I suspect it actually will mean increasing the rates at the higher brackets. There's no way they can decide who the richest and the poorest are otherwise. Unless they do it like they do in Mexico, where richer neighborhoods pay 10x as much as poor neighborhoods, and foreigners pay extra too. A single Canadian living in Mexico in something like a 100m flat using aircon only half the year told me their average electric bill was $750/mo.

And I think it is a lot more basic than raising revenue for other things, they don't have enough money to even buy the fuel for the plants right now.

And also, there are capacity issues. By raising the prices they encourage the wasteful people to use less to cut their bills.

We are probably using about 25LE/mo of electricity (not exactly sure as we have a prepaid smart meter and we only look at it once in a while to see how much we have used, but that is about average for us) but I have been finding ways to cut back usage even more. There are always things most of us can do to use less.

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Re: Egypt to raise electricity prices before election

Post by carrie » Mon Apr 14, 2014 6:33 pm

My landlord once explained to me that if you use a lot of elecricity then you are charged more for it here, if you can afford to use 2 or 3 air cons then you are classed as rich and pay more, unlike the UK, where the charge per therm drops the more you use.
I do my utmost to save electricity, never leave a light on in a room when I leave it, energy saving bulbs everywhere, not because of the cost but I believe we should all be conserving energy where and when we can.
I was also told don't know if this is true but that the cost of electricity is higher in some areas of Luxor those that are seen to be mainly touristy. Like Feyrouz.

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Re: Egypt to raise electricity prices before election

Post by Glyphdoctor » Mon Apr 14, 2014 6:48 pm

I'm not sure about electricity but a business landline phone is always more expensive than a residential one.

The way the rates work is that you pay a certain about for the first amount of electricity, say 5 units, then you pay more for the 5-20 per unit, and even more for 20-30 and so on. This sometimes results in odd results, like the fact that we pay about the same for our share of the building electricity (which consists of lights in the stairs, the elevator and the water pump) as we do for all the electricity we consume in our own flat, because the amount used is more, even though it probably is not proportionately more in terms of units used.

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