Fuel and tax increases hit Egyptians on top of food costs

An Egyptian gasoline station worker directs a vehicle entering a gasoline station in Cairo, Egypt, Tuesday, May 6, 2008. Egypt's parliament endorsed a government bill to raise taxes and fuel prices less than a week after President Hosni Mubarak announced a 30 percent salary increase for all government employees. (AP Photo/Amr Nabil)

CAIRO, Egypt—Egyptians awoke Tuesday to steep fuel and cigarette price hikes aimed at funding new raises for government workers, prompting fears that people already weighed down by skyrocketing food prices will be struggling to buy basic goods.

People raced to gas stations to fill up Tuesday morning, only to find the average price of gasoline and diesel had shot up 46 percent, to 34 cents a liter, which is about a quart.

Many service stations had signs scribbled with fresh prices plastered over the gas pumps. At one station, a customer accused the attendant of trying to con him. Eventually, he was convinced the new prices were real and paid up.

Another attendant, Masoud Abdel-Hamid, grumbled as he tried to calm customers.

"They think the fuel increase will affect only the rich," Abdel-Hamid said of the government. "Oh, no. Everyone uses transportation."

Last week, President Hosni Mubarak ordered a 30 percent pay raise for all government and public sector employees -- almost 6 million people -- temporarily assuaging a population increasingly restive over stagnant wages and rising food prices.

But to raise the $3.6 billion for the salary hikes, Egypt's parliament passed a bill late Monday increasing taxes and cigarette prices, reducing fuel subsidies and removing tax breaks from private education and heavy industry.

Iman Shawky, a psychiatrist and mother of two, said the price increases affected everybody.

"What the government gave to the people with their right hand, they took back with their left," she said.

The sudden price increases compound the problems in Egypt, where violent protests over the cost of food in early April resulted in three deaths. Eleven people also died the last two months during fights that broke out in lines to buy subsidized bread.

Prime Minister Ahmed Nazif promised the new law won't burden poor Egyptians, but on Cairo's streets, many were feeling the pinch. The cost of cigarettes, a staple for many in this country of heavy smokers, went up about 10 percent.

Mustafa Fathy said he would drop his brand, Marlboro, which is now $1.70, for the local Cleopatra at 60 cents a pack.

Analysts said Egypt's economic woes would deepen. Ahmed el-Seyyed el-Nagar, editor of Egypt's Economic Report, said the hikes would fuel inflation, which in turn would "devour" the salary raise.

Many people are unable to adapt because they can't "tighten their belt further," he said. "But we are not sure when they will protest."

Last month, protesters tore down a billboard of Mubarak and fought with police in riots in the industrial city of Mahalla el-Kobra. The violence claimed three lives and was Egypt's worst unrest since 1977 riots over increased bread prices.

------

Associated Press writer Pakinam Amer contributed to this report.