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Egypt opens post-holiday period with new hikes in VAT, power prices

  • 04/07/2017 (15:05)
In Egypt, players have opened the post-holiday period with a new VAT implementation, which entails an increase to 14% from 13% as of July 1. This was seen as the second phase of the VAT regulation which was approved on August 28, 2016 as part of the government’s fiscal reform program.

In addition to higher VAT rates, Egypt has also announced increases of up to 55% in fuel prices recently to be valid as of June 29 for a second time since the floatation decision in last November. This was widely expected; however, the increases were reportedly larger than anticipated by Egyptians who are already struggling with the increasing living costs after the floatation.

This news has naturally not been welcomed in the Egyptian market as players are also talking about a 30% increase in electricity prices in July.

“The Egyptian market is troubled amidst the government’s decision to increase power prices, besides the 1% increases in VAT, since players are complaining about higher finance and their weak margins. Converters are very pessimistic about their business given higher costs after the new increases issued in the electricity sector amidst the stagnant market since Ramadan," reported a distributor offering on behalf of a Saudi producer.

“The market is troubled with the new VAT increases and end product buyers are reluctant to make any purchases amid the increasing cost of living amidst poor economic conditions. Converters are only working for very short commitments and they no longer receive inquires in large quantities, hence operation rates are lowered as well," said a film manufacturer.

Another converter also argued that the recent increases will impact all aspects of public life. “Locally-held offers have gained ground by around EGP500-800/ton ($28-45/ton) compared to the week before the holidays due to the VAT hike. Demand remains limited to the buyers’ needs as players cannot afford the prices increases,” added the converter.

A trader operating in Alexandria, “Prices are firming up supported by the new VAT implementation while manufacturers are confused about their costs as they are struggling to reflect these increases on their end product demand.”
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