Egypt ‘did not have luxury of postponing reforms’

Egyptian Prime Minister Sharif Ismail said the government did not have the luxury of postponing reforms, a day after the currency was devalued and fuel prices were raised.
Egypt floated the pound on Thursday amid a dollar crunch that threatened to grind imports to a halt, causing the pound to fall from 8.8 to the dollar to more than 14 pounds.
The government also announced an increase in fuel prices, with low grade petrol increasing by 50 percent to 2.35 pounds a liter while higher octane fuel rose by about one third to 3.5 pounds per liter.
“We did not have the luxury of postponing” the decisions, Ismail said at a news conference.
Finance Minister Amr El-Garhy said the country was facing a budget deficit of 11 percent this year.
The government of President Abdel Fattah El-Sisi is rolling out an austerity program and seeking billions in support from abroad in order to meet conditions for a $12 billion loan from the International Monetary Fund.
The country has struggled to boost its foreign currency reserves in the political and economic turmoil that has followed the January 2011 uprising that toppled former ruler Hosni Mubarak.
The government has proposed a reform package to narrow the budget deficit — about 13 percent of GDP — that includes cuts to power subsidies and a value added tax to raise revenue.
Subsidies account for 7.9 percent of total government expenditure, according to the Finance Ministry.
Ismail sought to assure Egyptians, many of whom rely on government subsidised food, that prices would not skyrocket after the currency float.
“There will be an increase in some prices” Ismail said, but “there will be an intensified campaign to control prices.”
The Oil Ministry announced the increases in prices of subsidized petroleum products as part of the financial reforms.
Floating the pound had long been among a list of measures demanded by investors and international creditors, but had been avoided in the fear that rising prices could provoke unrest.
Lower grade petrol would go up from Friday by nearly 50 percent to 2.35 pounds a liter while higher octane fuel would increase around one third to 3.5 pounds per liter, according to an oil ministry statement.
Egypt’s pound plunged in value on Thursday, with the dollar trading on official markets at between 13.5 and 14 Egyptian pounds, according to several banks contacted by AFP, up sharply from the previous rate of 8.8.
Thursday’s central bank decision came as a surprise, after officials said they would only consider a flotation once foreign reserves reached $25 billion, up from September’s $19.6 billion.
Egypt has struggled to boost its foreign currency reserves in the political and economic turmoil that has followed the January 2011 uprising that toppled former ruler Hosni Mubarak.
Central Bank Gov. Tarek Amer said earlier the government had pledged to continue subsidising food items “to protect the poor from the rise in prices.”

Source: Arab News