CAIRO: Egypt will not raise electricity prices for the fiscal year starting July 1, state-run Al-Ahram newspaper cited the electricity minister as saying.
Some analysts said the decision is meant to alleviate the financial burden on citizens already dealing with high unemployment and rising inflation.
“The government now is trying to please everyone, they are trying to maintain their deals abroad and at the same time they can’t increase the prices inside the country because there is already inflation,” said Noran Ali, petroleum analyst at CI Capital. “Any further surges now will affect the economy and right now you don’t want to antagonize the people.”
After the January 25 revolution ousted Hosni Mubarak while calling for higher minimum wage, democracy and human rights, the current Cabinet has a lot to consider over the coming months.
“The government now will have more socialist tendencies, even if the feedstock of electricity, is high, they just won’t be able to raise prices at home,” Ali told Daily News Egypt.
She emphasized that the current government can’t be firm with the people now with the amount of demonstrations taking place across the country in order to ensure the revolution’s demands are met.
Other experts said the government’s decision might actually make people use up more electricity and thus continue to decrease feedstock.
“By not raising electricity prices, we are actually encouraging people to use more energy and electricity,” said Magda Kandil, executive director of the Egyptian Center for Economic Studies. “If it’s increased, people will rethink their usage and be more aware of their resources.”
Moreover, Kandil pointed out that since the government is not increasing prices internally and there is a surge in fuel prices, they will have to resort to other means.
“The electricity and energy issue is an eternal problem, now the prices are increasing, so this means now the government is borrowing more to cover these costs, if they aren’t increasing prices,” she said.
According to Egypt’s finance minister, the country’s deficit could hit LE 185 billion the next fiscal year.
According to Kandil, government debt is another issue that the state will have to deal with. “It’s obvious the government is promising more than it currently has, there are internal problems and there are frustrated citizens here, if the government is borrowing a lot and not having a way to pay back and plan ahead, this will pose another problem,” Kandil added. “And, the economy today is already in a critical situation.”
Kandil suggested another route that could have alleviated the situation given the inevitable decline in resources and surge in prices. “If they will stabilize prices, they should stabilize it based on the usage of each consumer, after a certain amount of usage, they should impose the appropriate fees.
“The problem is we import gas at lower costs to European countries, and Jordan and Israel as well, this is a bigger issue,” said Kandil. “It’s like we are supporting other economies.”
Ali pointed out the same concerns with the feedstock of electricity. “It’s very difficult to analyze the situation from the oil and gas point of view only; we have declining crude oil reserves and most of the time we import petroleum products, also export costs of natural gas today is a problem,” said Ali.
According to Ali, the export price of gas to Israel, for example, which has been a constant controversy among Egyptians, is set at $3 dollars when the international standard price is $4.
Egypt’s gas represents 1 percent of the total world’s resources, which according to Ali, is already not that much.
“When you have a crisis at home the idea of exporting natural gas, especially at prices below the international standards, doesn’t make sense,” she added.