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Egypt Raises Domestic Fuel Prices by up to 15% before IMF Review

This picture taken on March 20, 2024 shows a view of the Cairo University bridge across the Nile river connecting Cairo (R) with its twin city of Giza (L). (AFP)
This picture taken on March 20, 2024 shows a view of the Cairo University bridge across the Nile river connecting Cairo (R) with its twin city of Giza (L). (AFP)
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Egypt Raises Domestic Fuel Prices by up to 15% before IMF Review

This picture taken on March 20, 2024 shows a view of the Cairo University bridge across the Nile river connecting Cairo (R) with its twin city of Giza (L). (AFP)
This picture taken on March 20, 2024 shows a view of the Cairo University bridge across the Nile river connecting Cairo (R) with its twin city of Giza (L). (AFP)

Egypt raised the prices of a wide range of fuel products on Thursday, the official gazette said, four days before the International Monetary Fund (IMF) conducts a third review of its expanded $8 billion loan program for the country.

The official gazette, citing the petroleum ministry, said petrol prices increased by up to 15% per litre, with 80 octane rising to 12.25 Egyptian pounds ($0.25), 92 octane to 13.75 pounds and 95 octane to 15 pounds.

Diesel, one of the most commonly used fuels, saw the biggest increase, rising to 11.50 Egyptian pounds ($0.24) from 10 pounds, according to Reuters.

This is the second time the government has raised fuel prices since the IMF expanded its loan program by $5 billion in March. Egypt has committed to slashing fuel subsidies as part of the agreement.

But Egyptians who spoke to Reuters, including taxi driver Sayed Abdo, complained that Thursday's move would mean an automatic increase in prices for daily goods.

"If you ride with me today and usually pay 10 Egyptian pounds, I will ask you for 15, because fuel prices are raised. That's normal, because when I go get food, what I used to buy with 10 Egyptian pounds becomes now for 15," he said.

"We don't know where we're headed with these prices."

On Wednesday, Prime Minister Mostafa Madbouly said prices of petroleum products will gradually increase until the end of 2025, adding that the government could no longer bear the burden of increasing consumption.

Egyptians have also endured blackouts, which Madbouly said had ended at the start of this week, as the country struggled to import sufficient natural gas to tackle the summer heat.

In April, the IMF estimated that Egypt will spend 331 billion Egyptian pounds ($6.85 billion) on fuel subsidies in 2024/25 and 245 billion in 2025/26.

The IMF's approval for the third review of the expanded loan program was originally expected on July 10, but was pushed back to July 29, with the lender attributing the delay to the finalisation of some policy details.

The IMF is expected to disburse $820 million to Egypt after concluding its review.

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EBRD: War and Weather Weigh on Economic Growth Again

A man walks past destruction caused by Israeli airstrikes in the Masaken neighborhood on the outskirts of Tyre, Lebanon on September 26, 2024. (Photo by Hassan FNEICH / AFP)
A man walks past destruction caused by Israeli airstrikes in the Masaken neighborhood on the outskirts of Tyre, Lebanon on September 26, 2024. (Photo by Hassan FNEICH / AFP)
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EBRD: War and Weather Weigh on Economic Growth Again

A man walks past destruction caused by Israeli airstrikes in the Masaken neighborhood on the outskirts of Tyre, Lebanon on September 26, 2024. (Photo by Hassan FNEICH / AFP)
A man walks past destruction caused by Israeli airstrikes in the Masaken neighborhood on the outskirts of Tyre, Lebanon on September 26, 2024. (Photo by Hassan FNEICH / AFP)

War and extreme weather are weighing on economic growth in countries covered by the European Bank for Reconstruction and Development (EBRD), the bank said in a semi-annual report released on Thursday.

The downward revision to 2.8% GDP growth this year and 3.5% in 2025 is a small change, shaving off 0.2 and 0.1 percentage points respectively. But it is the second downward adjustment for the lender's region, which covers emerging Europe, central Asia, the Middle East and Africa.

"Travelling through European cities, I see that the mood is very much down," EBRD Chief Economist Beata Javorcik told Reuters, adding that Europe was grappling with expanding conflicts and high energy costs.

"There is a sense that Europe (is in) some crisis."

While energy prices have moderated since their spike after Russia's 2022 invasion of Ukraine, Europe's gas prices are five times higher than those in the United States, the report showed.

Stagnating mining output in Kazakhstan and Uzbekistan, the conflict in Gaza and Lebanon, and severe droughts in Morocco and Tunisia are also clipping growth, it said.

Javorcik said Chinese stimulus measures could boost commodity-exporting EBRD countries, and that trade barriers had led Beijing to pour billions into Hungary, Serbia and Morocco - foreign direct investment that could rise further if global trade policy blocks more imports from China.

But Javorcik said the expanding crisis in the Middle East - with Israel bombing Hezbollah targets in Lebanon - would deepen Lebanon's political and economic crisis.

"It is quite likely that countries that are in proximity to the conflict in the Middle East will see an increase in the risk premium, so their borrowing costs will be higher," she said.

The EBRD also shaved 1.3 percentage points off Ukraine's expected growth in 2025, to 4.7% due to attacks on energy infrastructure, and said they could also cause inflation to accelerate.

"Imported electricity is more expensive, so it increases the cost. Moreover, there are blackouts, rolling blackouts... That's going to be detrimental for energy-intensive industries."

In Russia, though, the EBRD said growth of 4.7% outpaced expectations in the first half of 2024, driven in part by oil export prices that increased by more than 10% year-on-year.

EBRD analysis showed that the discount that importers paid for Russian oil, which once stood at $20 per barrel, had disappeared, casting doubt on the effectiveness of Western price caps.

"Sanctions are working but they are working slowly," Javorcik said. "It's an effect that is cumulative... and it is going to be slowing down Russia's productivity."