Cairo- Egypt officially raised electricity prices at a 40 percent rate on Monday; the increase is a part of the 5-year reform plan implemented to further bolster and support the country’s economy. The new rates will be effective as of September.
Electricity Minister Mohamed Shaker stated that the latest price hikes range from 25 to 40 percent depending on consumption levels and will be applied retroactively from last month, the electricity ministry said in a statement.
Egypt began a five-year program of price increases in 2014 to gradually eliminate domestic electricity subsidies.
According to the ministry, the new monthly tariffs for household brackets will be:
– Those (4.2 million subscribers) who consume up to 50 kw-h will pay EGP 0.11 instead of EGP 0.07
– Those (2.6 million subscribers) who consume from 51 to 100 kw-h will pay EGP 0.19 instead of EGP 0.14.
– Those (8.2 million subscribers) who consume from 100 to 200 kw-h will pay EGP 0.21 instead of EGP 0.16.
– Those (7.7 million subscribers) who consume from 200 to 350 kw-h will pay EGP 0.42 instead of EGP 0.30.
Until 2004, electricity tariffs had not changed for more than a decade. The government then announced a plan to raise prices – another rise touching certain consumers happened in 2008, and finally the subsidy reform plan started in 2014.
“The electricity subsidy was estimated at EGP 12 billion in this year’s budget, but we raised it to EGP 30 billion, and without the new prices the subsidy bill would have been inflated to EGP 48 billion,” Shaker said speaking to a press conference.
Investment in Egypt’s electric sector has reached EGP 75 billion ($8.4 billion).
The minister attributed the rise to the difference in the official exchange rate and the total investments that were carried out by the ministry since 2014 through 2015 and 2016 at a cost of around EGP 75 billion to add 6,882 extra megawatts to the grid’s capacity through new stations and maintaining existing ones.
The Central Bank of Egypt debased the local currency by 13.5 percent in March 2016 against the U.S. dollar to reach EGP 8.78 in an attempt to eradicate the black market.
To ease the electricity shortages, Egypt had signed an $8.9 billion deal with Siemens in June 2015 for three combined-cycle power plants with a capacity of 4,800 megawatts each as well as 12 wind farms.
The statement on hiking rates comes in the midst of talks with the International Monetary Fund (IMF) to secure a $12 billion three-year loan program, which tries to cut the country’s budget deficit through a number of reforms.
They include tax increases and a plan to wean the population off a decades-old subsidy regime that has often benefited the highest-earning households.