Egypt's government is planning to raise the prices of electricity and all state-subsidised fuels with the start of the 2014-2015 fiscal year next month, according to statements made by Planning Minister Ashraf El-Araby, as reported by Reuters.
Speaking at a press conference on Saturday during which the power cut four times, El-Araby told reporters that the cabinet plans to "introduce a series of measures designed to definitively tackle the budget deficit," including a rise in electricity prices for higher-consuming segments of the population and a re-pricing of all petroleum products.
The government's ultimate aim is to completely liberalise prices within the next three to five years, said El-Araby.
Last week, President Abdel-Fattah El-Sisi refused to ratify the state budget for the 2014-2015 fiscal year on the grounds that the budget deficit – projected at LE292 billion, or 12 percent of GDP – was excessively high.
The budget deficit will reach between LE240-250 billion by the end of the current fiscal year on Monday, according to Finance Minister Hany Kadry Demian.
Speaking on private Egyptian satellite channel CBC after El-Sisi's objection to the draft budget last week, Demian said that the government is working to reign in next year's budget deficit to 10 percent of GDP.
This will be achieved through the introduction of a Value Added Tax (VAT) to replace Egypt's current complex and unjust web of sales taxes, said Demian, a move that is eventually expected to bolster state revenues by LE40 billion.
Energy subsidies will also be subjected to further reform through price hikes and other measures, affirmed Demian, without going into further detail.
Egypt's public finances have long been suffering under a sprawling fuel subsidy programme that consumes 20 percent of public spending every year.
In late 2012, the government liberalised the price of the highest quality gas, octane 95, to be sold at LE5.90 ($0.84) per litre instead of the subsidised price of LE2.75 ($0.39) per litre.
It also raised prices for cement companies that use low-quality mazut for production by 130 percent to reach LE2,300 ( $328) per tonne, compared to the previous price of LE1,000 ($143) per tonne.
In the last two months, official sources have been quoted as saying that the costs of three widely-used forms of petrol – 92 octane, 80 octane and diesel – will be raised by LE0.50 to LE1 per litre.