CAIRO: Egypt will repay U.S. $1 billion of the debt that public oil companies owe to foreign partners within two months, Minister of Petroleum Sherif Ismail revealed late Tuesday.
In a phone interview aired on CBC channel Tuesday, Ismail said Egypt had repaid U.S. $1 billion out of a U.S. $6.2 billion debt owed by the State-owned oil companies, including the Egyptian General Petroleum Corporation (EGPC), to foreign companies last year, MENA reported.
“This repayment comes in light of a program aimed at restoring confidence in Egypt’s economy after years of turmoil,” added the minister.
The Ministry of Petroleum had announced, in an official statement earlier, that it will pay-off U.S. $3 billion of this debt in monthly premiums until 2017, in order to encourage its foreign partners to intensify production and exploration operations.
Egypt has been trying hard to pay-off its energy debts resulting from significant fuel subsidies, while the country suffers a major energy crisis due to a significant fuel shortage, which has led to daily power cuts nationwide and has dramatically harmed the industrial sector.
Each ton of fuel carries a government subsidy of 3,000 EGP (U.S. $447), which is a heavy burden on the state budget, according to data from the Ministry of Petroleum.
Some of the foreign companies had threatened to cut off ties with the EGPC and suspend their operations in protest of the delayed repayment, posing a risk to development projects in Egypt.
“Paying this debt will give the companies incentive to pump up new investments in research, exploration and speeding up fields’ development,” the minister said in October.
Ismail further announced that Cairo receives petroleum aid worth U.S. $700 million per month from Arab States, including Saudi Arabia, UAE and Kuwait, MENA reported.
In the wake of the June 30 mass protests and the ouster of former president Mohamed Morsi, Saudi Arabia, Kuwait and the Emirates pledged U.S. $12 billion in aid to Egypt, including U.S. $4 billion in petroleum products.
Gulf aid contributed to reducing fuel subsidies during the first half of 2013/2014 fiscal year, registering 64 billion EGP, while the interim government expected 70 billion EGP, according to EGPC data.
Earlier this month, the Cabinet approved the use of coal as long as it abides by environmental standards, and increased penalties for those who violate regulations, in an attempt to overcome the growing fuel shortage, despite concerns over the environmental damages coal will cause.