Egypt announces steep rise in electricity price in IMF-backed reform

Egypt announced a major increase in electricity prices on Thursday as authorities continued to cut government subsidies under an IMF-backed economic reform package.

Electricity Minister Mohammed Shaker said prices would rise by between 18 and 42 percent for household bills starting from this month.

The government has been looking to slash the subsidies it uses to keep consumers' energy prices down and raise taxes in a bid to tighten up government finances.

The measures are part of a three-year $12 billion International Monetary Fund loan agreement it hopes will lure back foreign investors who fled after a 2011 political uprising.

It said previously it would phase out electricity subsidies entirely by the end of the 2018-19 fiscal year beginning in July, but Shaker said tough economic conditions brought on by the floating of the pound currency in November means the subsidies will be phased out more gradually, by the end of 2021-22.

"We were supposed to have been completely done with the (electricity) subsidy in the current and next fiscal years," Shaker said, with the current fiscal year starting on July 1.

"Owing to conditions related to the big increase in the exchange rate, we have extended the period (for subsidies) by three more years," Shaker told a news conference announcing the new electricity prices.

Inflation has soared in import-dependent Egypt following the currency float, reaching a three-decade high of over 30 percent. Price rises are expected to continue following hikes to the prices of electricity and fuel.

Shaker said Egypt spent 64 billion Egyptian pounds ($3.58 billion) on electricity subsidies during the 2016-17 fiscal year which ended in June, more than twice the 30 billion initially expected in the budget, largely a result of higher import costs for liquefied natural gas (LNG), which supply its power stations, following the float.

The price hikes, which will take effect beginning 1 August, will cut subsidy spending to 52.7 billion pounds in the current fiscal year and then to 43.4 billion pounds in the 2018-19 fiscal year, Shaker said.

Since November, Egyptian authorities have floated the country's currency, slashed fuel subsidies twice, and adopted a value added tax as part of the programme, which has led to soaring consumer prices.

The value of the pound has since plummeted, with one dollar - worth 8.8 pounds at the official exchange rate in November - now worth more than 17 pounds, while annual inflation reached 30.9 percent in May.