Ahmad Abdel Rahman
June 28, 2024

Egypt announces a comprehensive plan to overcome its electricity crisis

With the rise in temperatures over the past few days, many are questioning the plans by the Egyptian government to reduce electricity loads. At the opening of several development projects, Egyptian President Abdel Fattah El-Sisi spoke about the crisis, saying at one: "Citizens must know the reasons for reducing loads. If the government obtains the real price of electricity, its prices will double twice, so where will the poor go?"

El-Sisi pointed out that the Egyptian government supports electricity generation with huge subsidies, and that the Minister of Finance and the Minister of Supply, and Electricity should have spoken about the crisis, its causes, and how to solve it before. Unfortunately, the two ministers have not spoken about the crisis. El-Sisi said: "If we take the price of the real cost of electricity, its price will double twice, which will affect the ordinary citizen, but the state does not do that to reduce the burden." He stressed that what the citizen pays for his electricity consumption is much less than what the state pays in terms of the oil derivatives needed to generate electricity.

He said that this crisis is not new, pointing to the preparation of a plan in 2016 to provide goods and services at the real cost. However, he said it was also necessary to take into account the challenges that Egypt faced over the last few years, such as the corona crisis, the global economic crisis, and the wars that have broken out in the region and their negative effects on the country.

USD300 million per month

Egyptian Finance Minister Mohamed Maait said that there is a relationship between electricity and oil, especially in relation to petroleum products, because the Ministry of Petroleum needs additional resources to import the petroleum materials needed to operate electricity. He added that reducing electricity loads for two hours a day saves USD300 million dollars per month (about EGP 1.5 billion).

The Egyptian Minister said there are two parts to this crisis. The first relates to the cost to the Ministry of Electricity, which has a deficit estimated to be about EGP130 billion (USD2.765 billion). The second part relates to the petroleum sector. Maait stressed: "The issue of the exchange rate affected electricity, even if there was hedging in oil pricing."

High cost of electricity production

At the beginning of April, the Egyptian government announced that it would resume work after the Eid al-Fitr holiday, which was also in April, on a plan to reduce electrical loads for two hours a day. This was a way of dealing with the increasing rise in consumption.

The plan includes reducing lighting on main roads and government buildings, and not holding sports matches during the evening, as well as closing stores and commercial centres on specified dates to reduce consumption. Work on the plan restarted after the cost of production increased after the Egyptian pound fell against the US dollar. However, the government has not announced a specific date as to when the plan will stop permanently, although it is gradually reducing electricity loads while increasing natural gas supplies to normal levels.

Last July, the Egyptian government began implementing plans to reduce electricity loads by cutting off electricity for two hours a day in most parts of the country, except for tourist cities. This was because of increased consumption, as a result of the extreme rise in temperature.

An Egyptian government spokesman, counsellor Mohamed Al-Homsani, said the government suspended its plan to reduce electrical loads during Ramadan last May to make it less costly for citizens. It said it will resume electrical loading after Eid Al-Fitr, which was in May.

Photo: Electricity in Egypt would cost twice as much as it does now if the government did not bear much of the cost burden (by Adobe using AI).