The government raised fuel prices in Egypt last week in a decision that is in line with the actions Egypt has been taking under its $3 billion loan programme with the International Monetary Fund (IMF) that extends through the 2025-26 financial year.

The fuel-price hike, applied on 1 March, ranges between seven and 10 per cent per litre and is driven mainly by fluctuations in global oil prices and the local exchange rate since the onset of the Russian-Ukrainian conflict.

The price of 95-octane petrol increased from LE10.75 to LE11.5 per litre, 92-octane went up from LE9.25 to LE10.25 per litre, and 80-octane increased from LE8 to LE8.75 per litre.

The price of compressed natural gas (CNG) increased to LE4.5 per metre, while mazut is now charged at LE6,000 per ton, except for bakeries and electricity stations which receive it at a subsidised rate. The price of diesel was kept unchanged at LE7.25 per litre.

The government applied three price hikes on fuel through the third quarter of last year, while it kept prices unchanged for the fourth quarter. Changes in fuel prices are decided by the Fuel Automatic Pricing Committee (FAPC) every three months. Under its $3 billion loan deal with the IMF, the government has undertaken to fully implement the fuel price indexation mechanism set up by the FAPC.

Last week’s decision takes into account the latest developments in Brent Crude prices and exchange-rate movements. Global oil prices in the fourth quarter of 2022 averaged $88.6 per barrel, and the Egyptian pound has lost over 50 per cent of its value against the US dollar since the war in Ukraine began, currently trading at over LE30.6 compared to LE15 before the war.

The FAPC is scheduled to hold its last meeting for the 2022-23 financial year in April. Its recommendations are not binding, and only a range of ±10 per cent is applied on fuel prices.

A source close to the FAPC told Al-Ahram Weekly that the committee had held its quarterly meeting on time in January but had decided not to move fuel prices amid the inflationary wave that was already weighing heavily on purchasing power.

Egypt’s annual urban consumer price inflation jumped to a 25.8 per cent in January, the highest in more than five years and up from 21.3 per cent December.

According to the source, the committee proposed that the right price for fuel in Egypt was LE18 amid the fluctuations in global oil prices, adding that the government is now considering whether the Ministry of Finance or the Ministry of Petroleum and Mineral Resources should bear the price difference.

The source said that the government intends to apply a similar hike to fuel prices before the end of the current 2022-23 financial year, which ends in June.

Over the current year, it has increased allocations for petroleum subsidies by 52.6 per cent to slightly over LE28 billion compared to the allocation of the 2021-22 financial year, which was valued at about LE18.5 billion.

According to Mohamed Saadeddin, head of the Liquefied Petroleum Gas (LPG) Investor Association, the Covid-19 pandemic, the onset of the Russia-Ukraine war, and the inflationary wave that came with it have forced the government to slow down the pace of phasing out fuel subsidies.

He said the government had kept diesel prices unchanged to avoid impacting inflation. Diesel is widely used to transport goods in Egypt.

The Central Agency for Public Mobilisation and Statistics (CAPMAS) is expected to announce February’s inflation readings this week.

The investment firm Zilla Capital projected Egypt’s inflation to hit its peak in March, as the month witnesses Mother’s Day celebrations on the 21st and the beginning of the holy month of Ramadan on the 23rd, both of which herald higher consumption.

Saadeddin added that despite the recent fuel-price hikes, Egypt remains among the cheapest countries globally in terms of fuel pricing. It ranks seventh globally for the lowest price for petrol, according to the Global Petroleum Price report released this month.

The average price of a litre of petrol in Egypt is about $0.351, while the average price globally is about $1.3, equivalent to between LE37 and LE40 per litre, the report said.  

* A version of this article appears in print in the 9 March, 2023 edition of Al-Ahram Weekly