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Egypt Hikes Prices With Government Eyeing Bigger IMF Loan

Increase in Key Services

Due to the war in its neighboring country, Egypt has been in a financial rut for quite a time now. The Egyptian officials started the new year by raising the prices of a bunch of key services. The main motive behind this step is to heap new pressure on the consumers. Through this, the government can raise revenue and hence, increase the amount of rescue package that the International Monetary Fund (IMF) will provide.

Attempt since last year

Egypt has been in talks since last year for obtaining a loan ranging from $ 3 million to $ 5 million. IMF is considering a possible bailout of Egypt because of the devastating effects the Israel-Hamas war had on it. The war is not only depleting Gaza’s population, but it is also affecting the financial condition of neighboring countries like Egypt, Lebanon, and Jordan. This is happening due to the loss of tourism and higher energy costs. Egypt is the IMF’s second largest debtor. No matter how much the government is trying to push it, the request to the IMF keeps being delayed.

What has been changed

The electricity prices for residential households have surged to up to 16% and 26%. The margin will be decided depending on the usage bracket, according to the power regulator. Moreover, the electricity prices for industries have been hiked to 20%. It has been put forward that the charges for metro and rail tickets will also be increased. The state-run Telecom Egypt is going to increase internet prices by over 30%. Most of these new price changes will be put into action in the upcoming days. This all is being done to make up for the lost economy that Egypt has faced due to the war.

 

The effect of inflation

After Abdel-Fattah-El-Sisi won the elections for the third term, the consumers have been facing economic pain. They simply want to portray that the authorities are taking action to bring back stability to the Egyptian economy. Egypt has a population of 105 million. All the people have been facing the effects of constant inflation. This has led to a severe backlash as the common people have cut down on their most basic needs.

Monthly Inflation

Last year the inflation surged to almost 35%. Sugar is the staple diet of any person. The prices of sugar have doubled since the last inflation. This has led to authorities enacting measures to avoid gauging the price. The inflation to the Higher Electricity Tariffs is set to add 0.7 % point to monthly inflation in January. It is also reported that in the upcoming months, it will keep increasing.

Government’s Battle

As expected, this struggle faced by Egypt has led to hoarders. Many sellers of staple diet ingredients have started hoarding these ingredients. Officials have also been blaming the dollar squeeze for such an increase in the prices of these basics. Authorities have taken steps and set up rules so that retailers have difficulty increasing these prices. The increase in the price of sugar was the main trigger for all this chaos. A baker in Cairo said that people have started buying pastries by piece instead of cakes. This is a great metaphor to understand the situation in Egypt.

 

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