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|14 May, 2018

Fares not fair: Protests near metro stations in Cairo as fare hikes add to cost of living

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People walk in front of Egyptian riot police are seen outside El Sadat metro station at Tahrir square in center of Cairo, Egypt May 13, 2018.

People walk in front of Egyptian riot police are seen outside El Sadat metro station at Tahrir square in center of Cairo, Egypt May 13, 2018.

REUTERS/Amr Abdallah Dalsh

Protests broke out in Cairo over the weekend, for the first time in over three years, sparked by fare hikes on the capital’s metro system.

Reports stated that dozens of Egyptians took to the streets following price hikes that have seen the cost of some tickets on the loss-making metro system trebling.

The disturbances were the first in Cairo for over three years, with public protests last occurring before the election of current President Abdel Fattah El Sisi to power in 2014.

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According to Reuters, dozens of Egyptians upset over the government’s decision to raise ticket prices staged protests around several metro stations in Cairo.

Security forces were deployed outside metro stations on Sunday. The news agency had previously quoted a security source as saying that around 22 people were detained by police during “limited and sporadic protests” on Saturday, but later said that most of the detainees have been released, although three people were “ordered detained for 24 hours pending further investigation.”

The government said raising the fees was a mandatory step to sustain the metro network that “has accumulated losses of 618.6 million Egyptian pounds ($35 million),” Reuters said, quoting the state news agency MENA.

The decision to increase the price of metro tickets is the latest in a series of austerity moves taken by President Sisi’s government as part of a tough programme of economic reforms aimed at curbing the country’s soaring budget deficit.

Subsidy cuts

Egypt enacted a series of measures such as cutting fuel and electricity subsidies and floating its currency as part of a $12 billion loan programme that the country signed with the International Monetary Fund (IMF) in late 2016.

Egypt's economy was hit hard by a series of protests that erupted in 2011 and which lasted for almost three years - until Sisi was first elected in 2014. The former army chief was re-elected in a vote last month that was widely seen as lacking real contenders.

Egypt’s core inflation, which does not include food, increased to 11.62 percent year-on-year in April from 11.59 percent in March, after declining for eight successive months, according to a Reuters report that quoted central bank data. The headline inflation rate continued to fall, however – to 13.1 percent in April, compared to 13.3 percent a month earlier.

Speaking to Zawya about the protests via a phone interview from Cairo, Egyptian economist Hany Tawfik said: “Anything that starts small could eventually set the entire place on fire. I agree that services and goods should be sold at its real value.  But such decisions related to lifting of subsidies should be accompanied with or preceded by some financial support to the low income citizens.”

Tawfik, who is a former head of the Egyptian Association for Direct Investment and the Arab Union for Direct Investment, expressed a view that the timing of the fare increases, coming days before the start of the holy Islamic month of Ramadan when spending patterns are typically higher, could have been better.

 “It shows an act of political stupidity on behalf of the government that will be followed by another stupid move in July when the electricity and fuel hike as expected.”

A note by Emirates NBD’s MENA Economist Daniel Marc Richards last week stated that Egypt’s draft financial budget draft that was revealed in March for its 2018-19 financial year, which begins in July, contained plans to cut fuel subsidies by a further 26.3 percent to achieve 89 billion Egyptian pounds in savings, and a further 46.7 percent cut in electricity subsidies to save another 16 billion pounds.

However, Tawfik argued that the government “should not blindly follow the IMF rules while completely ignore the public anger and social situation in Egypt”.

Zawya contacted two other Cairo-based economists but they were not immediately available to comment.

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(Reporting by Yasmine Saleh, Editing by Michael Fahy)
(yasmine.saleh@thomsonreuters.com)

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