CAIRO: Egypt’s general budget for the 2013-2014 fiscal year, featuring a 30 percent energy subsidy cut, remains unachievable unless serious economic reform policies, including an energy price hike are implemented, an anonymous source at the Ministry of Petroleum told Youm7 Wednesday.
“The influx of the Gulf states’ aid in the form of refined oil products, reducing the heavy cost of fuel subsidies, could be an alternative,” the source added.
The country’s budget deficit could by reduced by 10-10.5 percent of Egypt’s GDP by the end of the current fiscal year with a GDP growth rate of 3 percent only if the government’s economic reform plans in the tax system and subsidy program are implemented, according to Minister of Finance Hani Kadry.
Egypt’s budget deficit reached 14 percent of GDP last fiscal year according to Kadry.
Energy subsidies cost the Egyptian government 135 billion EGP ($19.6 million) a year, which represents a fifth of the state’s budget expenditures according to the general budget of the 2013-2014 fiscal year.
The cabinet has discussed cutting the fuel subsidy bill by raising the costs of some petrol products. The last price hike for fuel was eight years ago.
In April, the Egyptian cabinet decided to raise the price of natural gas pumped into homes and commercial buildings, according to The Cairo Post. The new prices are expected to save Egypt 1 billion EGP ($143 million) a year.
The anonymous source told Youm7 that the hikes in natural gas prices would have a positive but “minor” effect on the country’s budget deficit.
“The government is expected to raise electricity prices for heavy consumers,” the source added.
In April, the cabinet also approved a five percent hike on taxpayers with an income over 1 million EGP ($143,000) a year, to be implemented gradually for a period of three years. It is expected to boost state revenue by 2 billion EGP to 3 billion EGP ($285 million to $429 million) annually.
The cabinet has also considered replacing the sales taxes with a comprehensive value added tax (VAT).