Egypt and Algeria should further lower energy subsidies to cut government spending and promote energy efficiency, their energy ministers said on Monday.

Speaking at an Arab energy conference in Marrakesh, Egyptian Petroleum Minister Tarek el-Molla said subsidies were a burden on the budget, using up funds that could be spent on improving social services.

“We will be continuing to remove subsidies,” he said.

Egypt has committed to deep cuts to energy subsidies and other tough fiscal measures as part of a three-year, $12 billion International Monetary Fund (IMF) loan programme begun in 2016.

He said subsidised oil encouraged fuel-smuggling, adding that his country had spent $30 billion on oil subsidies in the last five years.

“Oil is sold at a market price representing 75 percent to 80 percent of the cost price,” said the minister.

Echoing him, Algeria’s Energy Minister Mustapha Guitouni said a surge in domestic energy demand should be addressed by gradually reforming the subsidies system.

“Algeria spends $15 billion annually in oil subsidies combined with another $15 billion in subsidising food and health services,” he said.

Algeria, hit by a fall in energy revenues from 2014 to 2017, has increased gasoline prices and talked about reforming a subsidy system but so far kept in place a welfare state as it faces presidential elections in 2019.

Source: Reuters