The Clap:
A source from the Electricity Ministry informed Enterprise on the condition of anonymity that the government has made the decision to delay planned increases in electricity prices from the rumored date of July until September. The source mentioned that the government has delayed enacting the increases until the electricity crisis is solved.
This comes as dwindling gas supplies amid a summer heatwave drove several fertilizer companies including Abu Qir and Sidpec to shutter their doors for the second time this month, and cabinet to reinforce closures for commercial stores at 10 PM.
Remember:
The state is prepping a strategy to entirely slash electricity subsidization over the next four years, after delaying the phaseout strategy from an initial 2019 deadline. The government said in 2022 electricity subsidies will cost the treasury EGP 76 billion by 2027.
Why this matters:
Ending energy subsidies is one of the IMF’s demands to unlock the USD 8 billion loan program. The IMF called on the government to control “unaffordable energy subsidies” and fuel prices in compliance with the prices mandated by the automatic fuel pricing committee, and channel spending instead toward social support programs.
Analyst’s take:
“The rationing of power usage can help reduce the country’s need for natural gas required to operate the power stations. However, this is only one side of the story, where costs can be reduced but on the other hand economic activity can be negatively impacted, especially in the retail and food & beverages sector which play an important role in the country’s consumption and hence GDP. That said, I believe the impact from this decision on companies listed on the EGX will be limited to companies with exposure to the retail and food & beverage sectors, like Raya Holding [RAYA] which has a subsidiary in that segment, namely Raya Restaurants, but it is a minor contributor to RAYA’s revenues and profits,” Amr Elalfy told us.
