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Egypt increases fuel prices following depreciation of local currency

Egypt increases fuel prices following depreciation of local currency

The Cabinet’s Facebook page announced the new prices, which took effect on Friday morning. Diesel, crucial for transportation, increased from 8.5 Egyptian pounds ($0.18) to 10 pounds ($0.21) per liter. Egypt, a net energy importer, raised the price of 95 octane gasoline to 13.5 Egyptian pounds ($0.29) per liter from 12.5 pounds ($0.27).

The government attributed the hikes to higher energy import costs due to the local currency’s depreciation and global energy price surges following Red Sea turmoil.

On March 6, Egypt’s central bank adopted a market-based exchange rate after defending an overvalued local currency, leading to a parallel market. The pound’s official rate fell from nearly 31 to 51 per U.S. dollar before appreciating by nearly 10% as the banking sector received significant foreign currency inflows.

Additionally, the government raised the price of widely used butane gas cylinders from 75 Egyptian pounds ($1.61) to 100 pounds ($2.14). Egyptians consume approximately 800,000 butane cylinders daily, with 50% imported.

These fuel price increases are expected to further impact consumer purchasing power and inflation rates. Last month, urban inflation rose to 35.7% from 29.8% in January, with food costs alone increasing by nearly 51% from a year earlier.

The price adjustments align with conditions set by the International Monetary Fund (IMF) for further loans to Egypt. Egypt recently reached a deal with the IMF to increase a bailout to $8 billion from $3 billion after extensive negotiations.

The IMF has consistently urged Egypt to depreciate its currency and implement monetary and fiscal tightening policies, including reducing government subsidies.

Egypt’s economy has faced challenges from government austerity, the COVID-19 pandemic, fallout from Russia’s Ukraine invasion, and the Israel-Hamas conflict. Houthi attacks on Red Sea shipping routes have reduced Suez Canal revenues, a key source of foreign currency. The attacks diverted traffic away from the canal, impacting Egypt’s economy.

Last month, the United Arab Emirates announced a $35 billion investment project along Egypt’s Mediterranean coast, offering support amidst economic challenges.


Egypt increases fuel prices following depreciation of local currency

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