Egypt to cut fuel subsidies as government seeks to reduce deficit

Egypt is to reduce spending on fuel subsidies by nearly 43 percent in the 2016/17 budget due mainly to lower global energy costs, officials stated Saturday.

Finance Minister Amr al-Garhy told a news conference state energy subsidies would fall to 35 billion Egyptian pounds ($3.94 billion) from about 61 billion pounds in the 2015/16 budget.

Consumers reacted angrily when the government cut spending on energy subsidies in mid-2014, a measure that caused domestic prices of natural gas, diesel and other fuels to rise by as much as 78 percent. They were reduced again in the current budget.

However, the deputy finance minister for fiscal policy said a decline in international oil prices would account for the bulk of the reduced subsidy spending in the next fiscal year.

“Most of the savings in petroleum product subsidies will be a result of lower global oil prices,” the deputy minister, Ahmed Kojak, told Reuters.

“There is also a saving of about 8-10 billion (Egyptian) pounds that will come as a result of new reforms that the Petroleum Ministry will outline in agreement with us,” he added.

Egypt is struggling to revive its economy since a popular uprising in 2011 shook investor confidence and drove tourists and foreign investors away. Its foreign currency reserves stood at $16.56 billion in March, down from about $36 billion in 2011.

The government has been trying to cut subsidies, which eat up a big chunk of the budget.

President Abdel Fattah al-Sisi has approved a draft state budget that reduces the budget deficit in the 2016/17 fiscal year to 9.8 percent of gross domestic product (GDP) from the current 11.5 percent.

Source: Reuters