Egypt has embarked on reforms sought bythe International Monetary Fund (IMF) and the World Bank by
raising the price of diesel oil and other types of transport
fuels.
    The energy price increases were the first visible measures
taken in return for IMF standby credits and World Bank loans.
    Effective today, fuel oil prices were trebled and prices of
gas oil, diesel and kerosene went up by over 50 pct, an
Egyptian General Petroleum Corp (EGPC) official said. He said
fuel oil will sell for 28 Egyptian pounds a ton, instead of 7.5
pounds.
    Kerosene and gas oil were raised by 66 pct to sell for five
piasters a litre, while diesel rose 50 pct to 4.5 piasters.
    The government is expected also to act soon, possibly as
early as next weekend, to simplify the country's complex
exchange rate system, bankers said.
    Moving towards a more realistic exchange rate for the pound
was part of a package of reforms sought by the IMF and creditor
governments. In return, Egypt stands to receive up to one
billion dlrs in IMF standby credits phased over three years to
help it repay its 38.6 billion dlr foreign debt and guarantee
rescheduling by western governments, the main creditors.
    Energy price increases were also a condition of progress on
World Bank project loans of up to 800 mln dlrs in energy,
communications and other sectors which have been under
negotiation for several months, western diplomats said.
    The U.S. And Western Europe have pledged political backing
for President Hosni Mubarak's government, committed to a
multi-party political system and peace with Israel and
strategically poised in control of the Suez Canal.
    Fuel price rises, postponed at least once and likely to
lead to higher retail prices of basic goods, were a test of the
government's resolve to pursue economic reform, diplomats said.
    But the new prices are still below world market levels.
    There was no announcement of increases in more politically
sensitive products such as gasoline or natural gas, used for
cooking, and the mass-circulation Al-Akhbar newspaper said they
would stay the same.
    Official comment was not available on speculation among
bankers and diplomats that the Central Bank would soon tinker
with the pound's exchange rates to try to channel more dollars
into the banking system away from the illegal but tolerated
free market.
    The Central Bank was expected to set up a committee in
which 10 commercial banks, including the four state-owned
banks, would decide the pound's value every day.
    The official "incentive rate," currently set by the Central
Bank daily, is around 1.36 pounds to the dollar, against 2.15
on the free market.
    Bankers predicted that the banks' committee might set rates
around 1.80 or 1.90. But some doubted this would serve the aim
of curbing the free market.
 REUTER
