Government raises household electricity tariffs by up to 69.2%

As of July, Egyptian households will face significantly higher electricity bills after Electricity and Renewable Energy Minister Mohamed Shaker announced an increase in tariffs in a Tuesday press conference.

The lowest consumption bracket will see the most significant hike, an increase of 69.2 percent, while the highest consumption bracket is not subsidized and will pay more than the cost of generating electricity, Shaker said.

The Cabinet gave the new prices preliminary approval on May 30, and passed them via an administrative decree (Decree 157/2018) on June 4. The tariff increase comes as part of a structural adjustment program with the International Monetary Fund (IMF). The program aims to liberalize markets and restructure the state budget, leading to increasing costs of basic goods and services.

Households' electricity tariffs

Average monthly electricity bill for households

Households' share of electricity subsidies bill

The government began gradually liberalizing electricity prices in July 2014, with the purpose of completely eliminating the electricity subsidy bill within five years. However, the timeframe for this plan had to be extended until 2022, after the November 2016 devaluation of the pound raised the costs of fuel imports needed for electricity generation, which in turn increased the electricity subsidy bill beyond its initial targets. Fuel imports contribute 60 percent to the total cost of electricity generation, Shaker said.

The bill for electricity tariffs in fiscal year 2018/19 is LE46 billion, however, the state budget allocates the bill only LE16 billion, Shaker said during the Tuesday press conference. According to the minister, the remaining LE30 billion is financed through state arrears to the Electricity and Renewable Energy Ministry and the profits made from the highest consumption bracket.

The 2014 changes to electricity prices, that came one month after President Abdel Fattah al-Sisi took office, were among a number of austerity measures implemented by the state with inflationary repercussions. Egypt's deal with the IMF, committing itself to further structural adjustment targets in exchange for a US$12 billion loan to be disbursed over three years, came two years later, after extensive negotiations. In the months that followed, inflation rates soared, exceeding the 30 percent benchmark in mid-2017, before beginning a process of gradual decline in September of the same year.

Economists previously told Mada Masr they predict that there will be another surge in inflation following the recent energy subsidy cuts.