Electricity subsidies only introduced after 2011

CAIRO – 8 July 2017: The latest decisions to raise electricity tariffs were unwelcomed by Egyptians, although the term "electricity subsidies" was not used in any general budget before 2011.

Reading through the general budget of past years revealed that the budget did not allocate subsidies for electricity until the fiscal year of 2011/12, coinciding with the January 25 revolution where it was zero.

This was changed after the increase in the gas prices globally, as gas is used in power plants to generate energy, in addition to the depreciation of the Egyptian pound against the U.S. dollar which led to higher costs of production for electricity firms versus a stable price for the users.

The expected value of electricity subsidies in the fiscal year 2017/18 is estimated at LE 30 billion ($1.7 billion), representing 9 percent of the total subsidies allocated in the budget.

This percentage guarantees covering the financial deficit of electricity firms, resulting from selling the electric current at a lower value than its cost, according to the financial statement for the FY 2017/18.

On Thursday, the Minister of Electricity Mohamed Shaker announced the anticipated new electricity tariffs, with price increases ranging between 15-36 percent depending on the consumption bracket. The new increase in electricity prices will be included in the August bill.

The government previously said that it would phase out electricity subsidies entirely by the end of the 2018/19 fiscal year, but Shaker said that tough economic conditions brought on by the flotation of the pound in November,2016 means that subsidies will be phased out more gradually by the end of 2021/22.

Shaker said Egypt spent 64 billion Egyptian pounds on electricity subsidies during the 2016/17 fiscal year; more than twice the 30 billion initially expected in the budget.

The recent decision of the Ministry of Electricity was not welcomed by Egyptians of all classes, as the new tariffs did not include any exemptions. All the range brackets were increased as follows: