Egypt's government announced significant increases in fuel prices on Friday, with rates rising between 11.7 per cent and 33.3 per cent in different categories.
This increase, the first this year, is part of a broader effort to phase out subsidies and align fuel prices with international market rates by the end of the year, as stipulated under the International Monetary Fund’s $8 billion Extended Fund Facility agreement last year.
The Ministry of Petroleum and Mineral Resources said the price per litre of 95-octane petrol had been raised by 11.7 per cent to 19 Egyptian pounds ($0.37), 92-octane petrol by 13.1 per cent to 17.25 pounds, and 80-octane petrol by 14.5 per cent to 15.75 pounds.
The price of diesel rose by 14.8 per cent to 15.50 pounds per litre, while the price for a butane gas cylinder for households was raised by 33.3 per cent to 200 pounds.
Fuel prices will not be reviewed for another six months, the ministry said, signalling that another hike would be necessary to bring fuel prices to market levels. It said a gap remained between production costs and market prices, with the state continuing to subsidise diesel, butane and lower-octane petrol to ease the burden on citizens.
Egypt last adjusted fuel prices in October.
The government currently spends about 366 million pounds daily – 11 billion pounds each month – on fuel subsidies, according to the ministry.
Egypt’s move to raise fuel prices is the latest in a series of steps towards economic reforms tied to its agreement with the IMF, which include subsidy cuts, currency devaluation and a reduced role for the state in the nation’s economy.
The IMF last month approved the disbursement of $2.5 billion to Egypt after completing the fourth review of the Extended Fund Facility programme. The fund commended the government’s efforts to stabilise the economy but stressed the need to reduce energy subsidies entirely by the end of 2025. It also said that the exit of the state from the national economy had been slow.
Prime Minister Mostafa Madbouly on Wednesday warned of the impact of global trade disruptions and rising import costs on Egypt’s economy and anticipated more inflationary pressures for Egypt in the coming months.
Price hikes come against the backdrop of falling inflation this year. Egypt’s annual inflation rate reached 13.1 per cent in April, down from 24 per cent in January, marking its lowest level since March 2022.
However, economists have cautioned that the decline is mainly attributable to a favourable base effect and does not fully reflect underlying economic pressures.
Balancing fiscal responsibility with the social impact of reforms remains a critical challenge as the country works to meet its IMF commitments. More than 62 million Egyptians rely on a sprawling food subsidy programme, and the country’s foreign currency reserves remain strained due to declining natural gas exports and disruptions in Suez Canal revenues caused by regional conflicts.
In its statement on Friday, the ministry said global geopolitical tensions and fluctuating production and transportation costs continue to drive up fuel prices.
It also highlighted ongoing efforts to boost domestic production and reduce reliance on imports.
“The state is committed to increasing local output by offering incentives to production partners, thereby reducing the overall import bill and mitigating the financial burden on the economy,” it said.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Countdown to Zero exhibition will show how disease can be beaten
Countdown to Zero: Defeating Disease, an international multimedia exhibition created by the American Museum of National History in collaboration with The Carter Center, will open in Abu Dhabi a month before Reaching the Last Mile.
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