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Egypt Pricing and Subsidy
Beginning in 1952 the government initiated a program of price
controls that included both indirect taxation and subsidies. The
aim was to reallocate resources to serve various goals ranging from
industrialization to social welfare, but the effects were mixed. In
agriculture, for example, the state set the price of agricultural
inputs, such as fertilizers and pesticides, and crops, especially
cotton and sugar. Some basic consumer commodities, especially food
and energy, and services, such as education, were subsidized to
make them available for the bulk of the population. In industry,
public enterprises paid subsidized rates for energy but had to sell
their products to consumers at fixed, low prices.
Price distortions and subsidies were magnified over time,
resulting in the misallocation of resources and straining the
government budget. For example, in 1987 the ratio of consumer price
per kilowatt-hour of electricity to production and distribution
costs was less than 0.25. This shortfall, coupled with rising
consumption, contributed to a growing government deficit, which
compelled the government to reconsider its pricing policy
(see Energy;
Manufacturing;
Agriculture
, this ch.).
Data as of December 1990
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