Government to cut 35 billion EGP in oil subsidies
A Whiting Petroleum Co. pump jack pulls crude oil from the Bakken region of the Northern Plains AP/Matthew Brown (archived)

CAIRO: Subsidies directed towards petroleum products will be reduced by 35 billion EGP in the 2014/2015 budget, to total 100 billion EGP instead of the 135 billion during the current fiscal year, government sources told Al-Masry Al-Youm newspaper.

Decisions to increase oil and gas prices on high-consumption sectors will be implemented by as much as 50 percent, Al-Masry Al-Youm reported.

The government hopes that such measures, along with applying a smart card rationing system for oil distribution, would overcome the budget deficit which will estimatedly reach 240 billion EGP by the end of the current fiscal year.

Agricultural sectors and transportation will be excluded of the possible increase in diesel oil prices, in an effort to support farmers and avoid increasing transportation costs.

Abdel Mottalib Abdel Hamid, economics professor at the Sadat Academy for Management Sciences, told The Cairo Post that “Egypt’s economic climate is ready for the amendment of natural gas price-restructuring and modification of electricity prices, as the current government is credible and wants to implement economic and political reforms.”

“Economic reform has two main aspects, which are rationing the public expenses from the budget and increasing revenues,” he said, adding that the decision to implement the smart cards system was a good way in which to avoid affecting lower-income brackets and ensure that subsidies only benefit eligible segments.

The cabinet had decided mid-April to increase the price of natural gas, used in homes and commercial activities, on the basis of consumption.

Under the new pricing structure, households and commercial users that are consuming less than 25 cubic meters of gas per month will be charged EGP 0.40 (U.S. $0.06) per cubic meter.

Those who consume 25 to 50 cubic meters per month will be charged 1 EGP ($0.13) per cubic meter while those who consume over 50 cubic meters will be charged 1.5 EGP ($0.20).

The current price of gas for households is estimated at 0.20 EGP ($0.03) per cubic meter, according to the Ministry of Petroleum website. Moreover, Planning and International Cooperation Minister Ashraf al-Araby announced mid-April that the Egyptian government is set to increase electricity fees by 20 percent before the presidential elections.

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