Raising fuel prices: right decision, wrong approach

01-07-2018 12:18 PM

Youssef Sidhom


 

Problems on hold

Hardly anyone I run into these days talks of anything but the rising prices or the World Cup games in which Egypt is taking part for the first time since many years. I believe our government feels exceedingly grateful that its decision to slap an average 48 per cent rise on fuel prices has coincided with the games, since the coincidence has split public interest and served to blunt the wrath against the price rise. Yet the government must be aware that the World Cup games will be over soon enough and people will fully focus on the pain that comes with rising prices.

I am not about to denounce the policy of raising prices, be that on facilities, services, or fuel; I totally comprehend the challenges of the economic reform Egypt is undergoing. It is inevitable that Egyptians should be weaned of the State-sponsored lifelong unconditional shielding, nurturing and pampering they have been accustomed to throughout long decades. Egyptians must take on the by now direly needed reform and development, and the upgrading of service facilities, which pre-require that subsidies should be lifted and prices freed. Once this is achieved, prices would reflect the true value of a service or commodity, and bring in revenue to be reinvested in development that would work to raise the living standards of the poorer classes. Throughout past decades, rich and poor equally benefited from State subsidy on goods and services, even though the rich hardly needed the subsidy. Once it is lifted, rich and poor will pay the true cost of their living, achieving a surplus in State budget that the government could direct towards serving the poor, whether through raising wages and pensions or through modernising facilities and services such as public health, education, or transport.

In fact, right after the recent rise in prices of underground metro and railway tickets, ambitious plans to develop and modernise both facilities were announced. Last month, following the rise in fuel prices, Minister of Finance, Mohamed Maait announced an increase in salaries and pensions as of July. He also announced reductions on income tax, and more tax deductions for lower brackets. Both moves may be interpreted as “directing subsidy to those who most deserve it”, a slogan touted by former governments but never applied.

I find myself in a constant struggle to convince those around me, Watani reporters included, that we should not only express the collective pain on account of the rising prices, but should also raise awareness of the viability of the policies adopted for economic reform. These policies are the bitter medicine that brings on much suffering but also brings about cure.

However, I blame the State on account of the approach used by successive governments to impose price rises, regarding both the choice of timing and rates of raises. Governments have behaved as though they feared or wished to circumvent the decision to raise prices, and thus shrouded the issue in mystery and obscurity. Announcements of price rises came unexpectedly, hitting hard. And, given that the price increases occurr at lengthy intervals, they come at high rates which make it difficult for the people to absorb or conciliate their budgets to them.

Economic experts and those who follow Egypt’s economy and agreements with international funding institutions, on top of which the International Monetary Fund (IMF), are aware that Egypt drew an economic reform plan two years ago. It began with floating the Egyptian Pound and setting a schedule to lift subsidies off commodities and services by 2020. So why do governments insist on issuing decisions in a random suspicious way that shocks people, then spend huge efforts attempting to contain public anger? Why does not the State announce a quarterly 10 per cent increase in prices until we reach the pre-planned objective in 2020? The public would then expect the price rises and plan for them, as would businessmen and investors for their investments to accommodate the price rises.

The fact that policies are correct and effective does not mean the public will accept them; they have to be marketed well and transparently for the people to understand and bear their brunt. Egyptians need to shed their obsession that the government is lying in wait for them and has no qualms about harming them. A bit of Egyptian legendary humour exchanged on social media best expressed that. Last May, Egyptians were eagerly following the final game of the European Champions League between Real Madrid and Liverpool, not least because Real Madrid has always been a favourite with Egyptians and Liverpool now equally so because boasts among its ranks Egypt’s sweetheart footballer Mohamed Salah. With the game in full swing, one blogger took a moment off to post: “Hey bros! Let’s form two groups: while one watches the game, the other keeps an eye on the Oil Ministry lest it does it when we’re not looking and raises prices!”

Watani International

1 July 2018

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