MPs downplay 7% price hike for household gas as ‘slight,’ say govt keen to confront inflation

The government raised the prices of butane gas cylinders used for home cooking by over seven percent on Friday to LE75 per cylinder, another increase to the cost of living after February’s rates of inflation in Egypt reached the highest levels recorded in two and a half years.

The cost of gas for commercial use was raised by a similar margin, from LE140 to LE150 per cylinder.

Casting the hike as a conservative one, lawmakers who spoke to Mada Masr described the cost to the consumer as a “slight increase,” given the scale of the surge in energy rates on global markets as a side effect of the Russian war on Ukraine.

MPs said the decision reflects a keenness on the part of the government to keep a cap on domestic inflation, which has caused dramatic fluctuations in the consumer markets since the war broke out.

But for households across the country, the hike is the latest increment in eight years of government repricing decisions and cuts to fuel subsidies, over which time the price of a 12.5-kilo gas cylinder for domestic use has risen nearly tenfold while minimum wage in the state sector barely increased fourfold over the same period. 

And customers are likely to experience further hikes to the sale price of fuel over the course of the year, said lawmakers who spoke to Mada Masr, predicting that when the national rates per liter for gasoline and diesel are adjusted for inflation — as they are quarterly — the cost of these fuels will probably rise by a minimum of 10 percent. More expensive fuel would increase transportation costs and further add to Egyptians’ cost of living.

Even though Egypt’s households are now more exposed to global price fluctuations, the cost per cylinder of gas to the government remains high, said deputy head of the House Planning and Budget Committee Yasser Omar to Mada Masr.

While the cost of oil on global markets has surpassed the US$100-a-barrel mark, the state has budgeted for $60 a barrel, said Omar. “If the citizen bears a 7-percent increase, the state will [still] pay 70 percent of the cost,” he explained.

Committee member Mohamed Badrawy also told Mada Masr that the latest increase does not fully account for the actual cost of butane and the impact of the war.

In 2020, the Egyptian government undertook hedging contracts with international lending institutions for its fuel imports  that estimated a price point of $60 per barrel of crude oil. 

Lenders bear the cost of any purchases the government has to make over that rate, but the balance gets added to Egypt’s foreign debt commitments.