Moody’s says Egypt fuel price hike is ‘credit positive’

Egypt’s fuel price hike is credit positive, as the increase is part of the economic reform programme launched in the country, Moody’s Investors Service said in a report on Thursday.

The price hike is a drive for Egypt to reach agreed target for a fiscal deficit of 8.4 percent of GDP in financial 2018/2019 from the 9.8 percent of GDP seen in 2017/2018, as Moody’s report further showed.

The report also suggested that the new prices are to encourage a fall in the overall subsidy bill from its forecast of 7.5 percent of GDP this year to 6.5 percent in 2019.

Egyptian government announced last Saturday, which corresponds to the second day of Eid el-Fitr, the new prices of the fuel, to decrease its subsidy gradually.

Gasoline 95 prices went up from 6.6 pounds ($ 0.37) per liter to 7.7, while 92 octane gasoline prices amounted to 6.75 pounds instead of 5 per liter. Prices of gasoline 80’s liter increased to 5.5 pounds instead of 3.65.

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

Meanwhile, the government has announced raising the price of the cooking gas cylinder to 50 pounds instead of 30 and the commercial gas cylinder’s prices surged to 100 pounds instead of 60.

Egypt embarked on a bold economic reform programme that included the introduction of taxes, such as the value-added tax (VAT), and cutting energy subsidies, with the aim of trimming the budget deficit.

The country has floated its currency in November 2016 before it clinched a $12 billion loan from the International Monetary Fund (IMF).

The IMF loan helped the state’s foreign reserves to rebound by receiving the first three tranches of the loan with a total value of $6.08 billion.