The World Bank says that Egypt's electricity consumption is much higher than the minimum electricity requirement in low income countries, and expects the liberalisation of electricity prices to have "small effects" on poverty levels.
Earlier in February, the World Bank revealed details of a $3 billion loan aimed to improve the country’s economic situation. To receive the loan, Egypt agreed to reduce the government’s wage bill and energy subsidies, while raising tax revenue and electricity prices.
The "average electricity tariff across all consumer groups" is set to increase from EGP 0.226 per kilowatt-hours (kwh) in 2013-2014 to EGP 0.451 per kwh by 2017-2018, according to an official World Bank report dated Nov. 23, 2015.
Egypt also aims to reduce energy subsidies as a percentage of GDP from 6.6 per cent recorded in the previous fiscal year, 2013-2014 to 3.3 per cent by fiscal year 2015-2016.
The increase in electricity prices comes as part of the Egyptian government's plan, which started in the previous fiscal year, to restructure the energy subsidy scheme.
The plan includes an increase in electricity prices, which were further increased during the current fiscal year, except on residential consumers using less than 200 kwh per month, as tariffs have been frozen for this category “for social reasons.”
The bank said in its report that the exclusion of quintiles which consume less than 200 kwh per month "protects households who have low incomes" and other richer quintiles whose consumption fall below the aforementioned level.
It also said that Egyptian households spend an average of 1.8 per cent of their household total consumption expenditure on electricity, in the presence of energy subsidies.
The bank considers electricity consumption levels in Egypt to be "high", as the Egyptian households consume on average 234 kwh per month with an average of 212 kwh for rural households and 260 kwh for urban households.
Egypt's consumption is "much higher" than the minimum electricity requirement in low income countries which is 120 kwh per month, the bank said.
In the report, the bank attributed the households’ high consumption levels to the use of fans and air conditioning for cooling during the summer.
Electricity Minister Mohamed Shaker reiterated that electricity subsidies will be fully lifted by 2019.
Shaker told Aswat Masriya on Sunday that "the average electricity selling price to the citizen is half the production price."
The World Bank believes that the liberalisation of electricity subsidies will have limited impact on the poor, given the low share of the household electricity expenditure and "the high levels of electricity consumption under the context of a highly subsidized electricity tariff scheme."
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