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Egypt increases price of fuel

May 06 2008

Egypt increases price of fuel

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Arab World

By Agencies

People have protested outside Egyptian embassies against the cost of living in Egypt [AFP]
Steep rises in taxes on cigarettes and vehicle licences and a reduction in fuel subsidies have been passed by the Egyptian parliament.

The changes will be used to cover the cost of a 30 per cent pay rise for public-sector workers announced by the president last week.

Various forms of petrol will now go up in price by between 40 and 50 per cent.

Diesel, used by most public transport, will rise by 46 per cent. Gas used for cooking will also rise.

Economists argue that the move will increase inflation and offset the benefits of the wage increase.

There have been protests in the country over the cost of living, with 50 per cent of Egyptians living below the poverty line.

Hani al-Husseini, a tax expert and member of the Tagammu opposition party, said: "The government is giving with the right hand and taking back with the left hand."

The lower house of parliament approved the measures, proposed earlier in the day by the ruling party, by 297 votes to 76.

Fathi Sorour, the parliament speaker, had called for an urgent decision on the proposal.

The civil servants' pay rise will be forthcoming only if necessary revenue can be found to support it.

Ahmed Nazif, the prime minister, told a news conference the price rises would go into effect at 9pm 19:00GMT, and would generate 12bn Egyptian pounds ($3.6bn) for the budget.

He said public transport fares would not rise. Asked whether the combination of wage increases and price rises would affect inflation, Nazif said: "It won't have any negative effect on inflation because the money to finance wages is coming from real sources."