Oil subsidies hit 44.7B EGP in 1st half of 2014/15 FY
A worker adjusts the valve of an oil pipe at Khurmala oilfield in Arbil - REUTERS
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CAIRO: Egypt’s fuel subsidy bill amounted to 44.7 billion EGP ($5.85 billion) in the 1st half of this fiscal year (to end June 30,) the Ministry of Finance stated Monday.

In July, President Abdel Fatah al-Sisi raised fuel prices after energy subsidies were slashed in a revised and tightened budget to 100.3 billion EGP, compared to 144 billion EGP in the previous year, saving around 44 billion EGP.

Finance Minister Hany Kadry approved a package allocating 108.5 million EGP for natural gas home delivery for roughly 51,543 units, bringing the total number of units to which gas is delivered around 352,675 with a total financing from state budget estimated at 761.1 million EGP.

The subsidy cut was mainly aimed to reduce a soaring budget deficit which amounted to an estimated 14 percent of GDP for FY 2014-2015, before President Sisi ratified a revised and tightened budget with an estimated 10 percent shortfall.

The government has said it plans to remove energy subsidies completely within three to five years, without affecting the low-income class.

Fitch Ratings said in July that Egypt’s oil price hike was an “important step” to reduce subsidies, which will contribute to reducing Egypt’s substantial fiscal deficit, a key rating weakness.

The subsidy bill, mainly dominated by fuel products, accounted for about one-third of total spending in FY2013, or 12 percent of GDP, according to data from the Ministry of Finance.

In a February report, Fitch Ratings said subsidy reforms in Egypt along with lower oil prices were a contributing factor to the recent upgrade of the country’s credit rating to “B” from “B-” in December, with a “stable” outlook.

“Oil importers are benefiting from lower prices through reduced import bills and lower fuel subsidy costs… Egypt is a small net importer, but spent around 6 percent of GDP on fuel subsidies in FY14 (to end June,)” Fitch said.

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