Egypt announced a new sharp increase in fuel prices on Thursday, as it slashes government subsidies in a tough IMF-backed reform programme. The cabinet said that 82 octane petrol would sell for 3.65 pounds a litre (0.80 pounds a gallon) up from 2.35 (0.52), with the same increase for diesel, while 92 octane petrol rose from 3.5 (0.77) to 5.0 (1.1) pounds. The government first increased fuel prices in 2014 and again in November last year after floating the pound.
Prime Minister Sharif Ismail said the fuel subsidies were straining government financing.
The projection for next year at the same levels "is 150 billion pounds. This is a big number that neither the oil sector nor the budget can handle," he said in a press conference. The government plans to provide "less subsidies for fuel and to divert it to other sectors" such as development, he added.
The country had spent billions of dollars propping up the pound, which rose from 8.9 pounds to the dollar to 18 after its flotation. Investors and international lenders have applauded the reforms but the measures have fuelled inflation, which now hovers around 30 percent. Last year, the International Monetary Fund approved a $12 billion loan to Egypt to be disbursed over three years to help finance the reforms.
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