EGYPT: New price hike on horizon

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News reports saying that the government is considering lifting subsidies on oil and basic goods has raised eyebrows among Egyptians who might not be able to afford further price hikes. On every corner, you find people voicing concerns about inflation and further deterioration of their living conditions. Under the slogan of ‘achieving social equality’, the government announced that it would revamp the subsidy system to ‘make sure that state subsidies reach those who deserve them.’

Faced with a budget deficit, the government has said there is a need to revise Egypt’s social legacies, namely state subsidies. However, the issue remains highly sensitive for President Hosni Mubarak. The memory of the riots that erupted throughout the country in the 1970s, forcing former President Anwar Sadat to go back on a decision to lift subsidies on bread still haunts the government. Yet, there seems to be a strong conviction among the people that the government will cut subsidies as the new year begins.

The president’s son Gamal Mubarak is believed to be the architect of all unpopular economic policies. A strong proponent of economic liberalization, Mubarak has argued that Egyptians should be willing to pay the immediate price of the transition from a state-controlled to fully market economy contending that the move will pay off in the future. However, his claims fall short of convincing the public who believe that the President’s son has helped businessmen and investors at the expense of the poor.

‘I am concerned by Gamal Mubarak’s and his men’s leverage… He does not care about the people; he cares neither about me nor about you’ wrote Ibrahim Eissa, one of the regime’s staunchest opponents, in El-Destour newspaper, ‘Gamal Mubarak’s camp will not give up on the issue of lifting subsidies…For those people, the abolition of subsidies is not just an idea but a belief.’

If that happens soon, the government’s cuts will come on the heels of labor unrest and social disenchantment. Thousands of workers recently went on strike to protest deteriorating economic conditions and low pay. Now comes the question: is the government capable of containing further social disenchantment that will definitely follow any move to cut subsidies?

— Noha El-Hennawy in Cairo