Egypt targets energy subsidies with retail curfew

29 October 2012

Morsi government steps up efforts to rein in energy spending

Shops and cafes in Egypt will be forced to abide by a nationwide curfew from Thursday as Cairo begins long-awaited efforts to shrink its unsustainable state energy bill.

The ban will require stores to close by 10pm and restaurants by midnight in an effort to cut the commercial sector’s electricity consumption. Tourist outlets are exempt from the ruling.

The curfew is part of wider plans to reduce Egypt’s crippling energy subsidies, which absorb nearly 20 per cent of state spending and divert much-needed funding from other key sectors.

Earlier closing hours will shave 35 per cent off commercial electricity consumption, Aktham Abou el-Ela, a spokesman for the Electricity Ministry, told Bloomberg on 18 October.

The sector accounts for 8 per cent of Egypt’s total electricity consumption, he said.

The move has faced fierce opposition from business groups in Africa’s biggest city, who warn that any decline in energy consumption will be offset by falling profits. Ahmed el-Wakeel, head of the Federation of Chambers of Commerce, told Al-Ahram newspaper the ban will lead to losses of $E25bn and increase unemployment by up to 4 per cent.

Pamphlets distributed by activists in Cairo called for protests against the curfew. “Instead of cutting my livelihood, pass a minimum wage,” media outlets quoted the leaflets as saying.

The ban indicates Mohamed Mursi’s government plans to take a tougher line on energy subsidies amid efforts to revive Egypt’s flagging economy. Cairo has for decades resisted calls to slash funding for energy and food staples for fear of igniting unrest in its population.

But Mursi has faced increased pressure in recent months to push through subsidy reform and curb Egypt’s fiscal deficit, particularly from the Washington-based IMF. It is understood the fund will not release a much-needed $4.8bn loan until Egypt outlines a plan to cut its deficit.  

Loan talks between the IMF and Egypt are set to resume on Tuesday, when a delegation from the fund arrives in Cairo.

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