Motorists queue in front of gas stations on hope of leaving with a full tank (Photo: Mai Shaheen)
Egypt's government received the backing of international credit rating agency Fitch Ratings on Tuesday in its recent price hike on state-subsidised fuels.
"Recently announced fuel price hikes are an important step towards reducing subsidies that contribute to Egypt's substantial fiscal deficit – a key rating weakness," announced Fitch in a statement entitled Egypt's Fuel Price Hikes Are Positive for Credit Profile.
Egypt's sovereign credit rating, in decline since the country's January 2011 revolution, was upgraded to a "stable" outlook last January at B- by Fitch.
"Tackling subsidies is a key way of reducing Egypt's budget deficit, which we estimate at 12.1 percent of GDP in 2013/14 (to end in June)," said Fitch.
Last Friday, the government of Prime Minister Ibrahim Mehleb raised the prices of three widely-used state-subsidised fuels – 90 octane gasoline, 80 Octane gasoline and diesel fuel – by 40 to 78 percent, prompting widespread discontent and scattered protests.
The price of natural gas for passenger cars, mainly used by white taxi cabs in Egypt, went up 175 percent.
The move is part of a plan to cut LE44 billion in spending on fuel subsidies this fiscal year in order to rein in the country's ballooning budget deficit to around 10 percent of GDP.
Egypt's sprawling fuel subsidy system has long been denounced as one of the primary strains on its budget, accounting for a quarter of state spending annually.
The rating agency also expects financial contributions from the Gulf to help alleviate Egypt's fiscal burden in the coming year.
"Fitch assumes that support, primarily from Kuwait, Saudi Arabia and the UAE, will remain forthcoming and anticipates grants to be well above the budgeted level."
Grants included in the budget total $3.2 billion according to Fitch, compared to an official estimate of $16.4 billion received in the past fiscal year from sympathetic Gulf nations following the ouster of Islamist president Mohamed Morsi in July 2013.