“Prices are to increase by April 2025 although they were just raised last April per the amended Value-Added Tax Law issued in November 2023, which stipulates a 12 percent annual rise,” Embabi explained.

The Eastern Company announced Sunday that it raised the prices of its local cigarette products by EGP 22 piasters, effective last Friday, according to a disclosure the company submitted to the Egyptian Exchange (EGX), marking the third spike applied since the beginning of 2024.

“Another 25 piasters increase will be applied on tobacco products in the local market in 2027 according to Law No. 2 of 2018 on Funding Sources for the Health Insurance Authority,” CEO of Eastern Company Hany Aman told Ahram Online.

Law No. 2 of 2018 stipulates a 25-piaster increase in cigarette prices every three years until it reaches EGP 1.5, Aman added.

The recent increase is not related to the company but is mandated by the Health Insurance Law, he explained.

According to the Central Agency for Public Mobilization and Statistics (CAPMAS) latest report, the price of tobacco increased by 0.2 percent in June compared to May, hitting a 55.2 percent year-on-year increase which dropped to 27.1 percent in June.

Why 22 and not 25
 

The 22 piasters increase deviates from the legally mandated increase to prevent cigarettes from jumping to the middle tier, Embabi explained to Ahram Online.

Cigarette prices rose from EGP 34.50 to EGP 34.72, and if they increased by 25 piasters, they would have reached EGP 34.75, which is above the start of the middle tier that pays a fixed tax of EGP 7, he added.

The market's annual consumption is estimated at 85 billion cigarettes, according to Embabi.

The three cigarette tiers after the increase will be as follows: the lower tier between EGP 1 and EGP 34.72, the middle between EGP 34.73 and EGP 50.40, and the third from EGP 50.41 and above, he stated.

Cigarettes are subject to two taxes: one variable, representing 50 percent of the retail price, and the other fixed according to each tier. The lower tier pays EGP 4.50, the middle EGP 7, and the highest EGP 7.50, Embabi explained.

Supply shortage
 

Embabi attributed dual pricing in the local market to poor distribution policies and supply shortages despite the availability of imported raw materials.

These materials had been negatively impacted recently due to geopolitical repercussions affecting ship movements in the Red Sea, he explained.

The market share of smuggled cigarettes has risen to 8 percent, compared to 2 percent, to fill the supply shortage of the product, with their prices ranging between EGP 35 and EGP 38, Embabi noted.