A man carries a cooking gas cylinder at a selling depot in Cairo. Fuel subsidies have long weighed on the state budget and contributed to Egypt’s economic stagnation.
Reuters
Cairo
Egypt has earmarked 61bn Egyptian pounds ($8bn) for fuel product subsidies in the draft 2015-16 budget, Tarek El Molla, chairman of state-run Egyptian General Petroleum Corp (EGPC), said in a statement yesterday.
The cabinet on Thursday approved a draft of the budget for the next fiscal year starting July 1, but did not announce the amount allocated to fuel products subsidies.
The government is trying to reform the decades-old system of subsidies without angering Egypt’s rapidly growing population, now at 87mn.
Fuel subsidies have long weighed on the state budget and contributed to the economic stagnation that President Abdel Fattah al-Sisi promised to tackle when he took office last year.
In the current fiscal year, Egypt will have spent around 70bn pounds on petrol and natural gas products subsidies, not 100bn pounds as projected, El Molla added.
The government said in December its bill for fuel products this fiscal year would be 30% less than it had predicted thanks to sharply lower global oil prices in the second half of the year.
EL Molla said the fuel products allocation for the next fiscal year was based in part on a projected average price of $70 per barrel for Brent crude.
A switch to coal from natural gas and diesel in the cement industry also helped determine the figure, as did a change in domestic consumption, he said. El Molla said the government had a plan to reduce domestic fuel consumption by 3%-5% which would save around 3bn to 4bn pounds.
The government cut fuel subsidies last summer, raising prices by up to 78%, in a move lauded by economists but criticised by some Egyptians accustomed to cheap energy. More subsidy cuts are expected in the coming years.
Sisi asked his government earlier this month to consider postponing a smart card system for subsidised fuel which was due to come into effect on June 15, until all the sectors that don’t have these cards are covered.
The subsidies have led to Egypt turning from a net energy exporter into a net importer over the past few years.
