Egypt’s Foreign Reserves Slump As Subsidy Bill Soars

15 Jul 2022 Issue: 65 / 28 By: Peter Stevenson

Egypt has hiked domestic gasoline and diesel prices for Q3. But a sliding currency means prices remain way below market levels. As subsidy spending soars, foreign reserves have collapsed to 5-year lows. Will a much-needed IMF loan be forthcoming?

Egypt on 13 July hiked domestic gasoline and diesel prices by up to 10% for Q3, the highest quarter-on-quarter increase in nominal terms since a new pricing mechanism was introduced in mid-2019 (MEES, 12 July 2019). Prices for 95 Ron gasoline, the highest quality of the three grades available in Egypt, were raised by the maximum 10% allowed under the mechanism, by E£1.00/l to E£10.75/l.

However, these price rises were substantially less than the 13% fall in the value of the Egyptian pound against the US dollar over the previous quarter (from $1=E£16.1 to $1=E£18.5). As such the latest prices are actually lower in dollar terms than those three months earlier. Indeed, in dollar terms the latest gasoline prices ($0.58/liter, $2.20/USG, $92/B for 95 Ron) are only fractionally higher than those two years earlier at the height of the covid-induced slump in oil demand when global oil prices were well under half current levels (see table). (CONTINUED - 861 WORDS)