Businessmen say fuel subsidy removal serves low income segments

CAIRO - 3 July 2019: Two businessmen said they endorse the state's step towards removing the last segment of fuel subsidies, arguing that subsidizing fuel, according to the current way, negatively affects the poor.

They asserted that despite price increase, electricity prices remain competitive compared to neighboring industrial countries.

In an interview with Egypt Today, Ali Eisa, chairman of the non-governmental Egyptian Businessmen Association, said that the business community believes that continuing energy subsidyis unwise, and that subsidizing fuel forluxury cars is illogical.

Eisa suggested that subsidies should be handed in cash to those who deserve them,noting that commodities sold for less than their value lead to excessive consumption, whether they are fuel or food.

Engineer Magd al-Din al-Manzalawi, member of the Board of Directors of the Egyptian Businessmen Association,said that the business community supports the government's intention to remove the energy subsidies during the last 5 years. He added that the aim of such step is to make sure that the needy citizens benefit from the government subsidies.

Manzalawi told Egypt Today that such step cannot be achieved unless higher class citizens bear to pay the value of energy.

In order to achieve this, the government has raised electricity prices for people with high and moderate electricity consumption in order to support the needy sectors, Manzalawi said, adding that it will improve the budget deficit and achieve social solidarity as rich classes will bear the value of the subsidies for poor classes.He noted that electricity prices in Egypt are still cheaper compared to countries in similar economic levels.

Moreover, lifting subsidies on electricity contributes to providing funding for established energy production projects, and financing projects to modernize electricity transmission networks, which have not been renovated for decades.

Concerning fuel, Manzalawi said that lifting subsidies of fossil fuel can only affect the classes of people who own one or more cars, adding that these classes are capable of enduring the price hike.

He added that removing energy subsidies does not negatively affect the Egyptian industry, as it is bearable.

In June 2018, Egypt raised fuel prices for the fourth time since 2014 to meet the IMF loan's terms that entail the complete removal of fuel subsidies.

According to the prices announced in 2018, 95 gasoline prices went up from LE 6.6 (US$ 0.37) per liter to 7.7, while 92 octane gasoline price amounted to LE 6.75 instead of 5 per liter. Prices of gasoline 80's liter increased to LE 5.5 from 3.65.

The price of diesel became LE 5.5 a liter instead of LE 3.65, while the price of the natural gas used for vehicles rose to LE 2.75 per cubic meter instead of LE 2.