The government announced it would terminate electricity subsidies and reinstate VAT on 11 product categories from October, citing reduced inflation and energy costs as reasons for ending these cost-of-living support measures.
The Ministry of Finance stated that inflation is expected to stabilise at 2%, while fuel and electricity prices have decreased. It added that recent wage increases, particularly for public servants, and the readjustment of allowances have further mitigated the need for continued support.
The ministry argued in a statement that prolonged state intervention in energy prices should be avoided as it does not promote energy saving or significantly impact electricity demand and consumption.
From October 1, consumers will face a 5% VAT on previously zero-rated items including bread, milk, eggs, baby food, diapers, women’s hygiene products, coffee, sugar, meat, and vegetables. The graduated electricity subsidy will cease at the end of October, leading to higher consumer costs starting in November.
The announcement comes a day after the Consumer Protection Service reported a monthly increase in prices for 18 basic products and a decrease in 25 others. The Service’s Price Observatory noted that inflation had fallen to 1.5% in August, down from 2.1% in July and 2.7% in June.
Significant price increases were observed in vegetables and herbs (41.7%), fresh meat (4.1%), and cooking oils (2.4%). Liquefied petroleum gas cylinders saw a 3.3% rise, while sugar and instant coffee prices increased by 2.1% and 1.9% respectively.
The government maintains that various allowances and pensions are fully adjusted based on the cost-of-living allowance (CoLA) rate, which it claims will cover any price increases.
Read more:
