Egypt: President Sissi cuts subsidies
CAIRO, July 8, 2014 — The decision by new Egyptian President El Sissi to cut subsidies on several products will test his popularity.
On Saturday July 5, Egyptians were surprised by a sudden increase of gas prices. Mini-bus drivers throughout Cairo and the city of Ismalia took to the streets to demonstrate against the price hike. Police eventually used tear gas to end the demonstrations..
Prime Minister Ibrahim Mehleb announced that removing subsidies on several items, and the accompanying price rise, is necessary to boost the economy of Egypt. To reform the economy, the government raised the prices of several items, including food and gas, that were previously subsidized. According to the government, these subsidies account for almost a quarter of state spending.
Although the changes has been encouraged by foreign lenders including the International Monetary Fund, the former government of Mohamed Morsi avoided making the changes out of fear of potential backlash from a population already fatigued with riseing food prices. A famous bread-riot took place in 1977 during the reign of late President Sadat as a result of a similar decision.
The removal of subsidies will significantly impact Egypt. Most Egyptians are considered “poor,” with middle and upper classes forming only a small percentage of society. Over 30% of the population lives below the poverty line, and the unemployment rate exceeds 13.4%. “Obviously, one cannot classify Egyptian society today into higher, middle or lower classes. Income and wealth are the only criteria in a divided society” according to Galal Amin a professor of Economy at the American University in Cairo.
Mehleb justified the subsidy cuts on Saturday saying that the savings would be directed towards improving health and education.
Average people, however, expressed dissatisfaction with the move.
As a reaction to such decision, privately owned newspapers in Egypt such as El Masry El youm printed headlines such as, “The Hour of Suffering Struck”.
Political analysts expressed their concern about this sensitive subsidy issue and its consequences, while other economists said it was necessary.
Meanwhile, on Sunday July 6, President El Sissi held a meeting with the editors in- chief of Egypt’s most prominent newspapers in order to comment on the subsidy cut which he described as a “now or- never situation.” He said that those economic decisions have to be made in spite of public opinion as the country is drowning in debt estimated by 3 trillion Egyptian pound. El Sissi added that he isn’t “looking for fake popularity or one that can easily erode with no concrete basis.”
The impact of the removal of the subsidies will likely reveal the extent of Sissi’s popularity, and whether it is “fake” and subject to erosion, or whether it will last.