Egypt Independent

Minister: Govt considering three ways to subsidize fuel next fiscal year

The government is considering three ways to identify allocations for fuel subsidies in the new fiscal year 2013/14, which starts in July, Petroleum Minister Osama Kamal


“The first scenario [entails] allocating LE99 billion to subsidize fuel, if the government applies the smartcard system to distribute diesel oil, gasoline and butane gas starting in July, as announced,” Kamal said in a phone call with Turkish news agency Anadolu.

The government had previously announced plans to create a smartcard system for fuel subsidies.

Egypt has been considering new systems for distributing subsidized petroleum products in the face of fuel sales on the black market. Political tension has pressured the Cabinet to postpone the implementation of a new system.

The country faces a budget deficit for this fiscal year of US$30 billion. More than 60 percent of the deficit goes to fuel subsidies, which is distributed randomly.

The second scenario the government is considering, the minister said, would allocate LE120 billion for fuel subsidies, and the amount could increase if oil prices and thus petroleum products’ prices increase.

The final scenario, Kamal said, would allocate LE140 billion as an expected rate to subsidize petroleum products in 2013/14, if the Cabinet postpones the implementation of the fuel subsidies system this year.

Negotiations are ongoing over a $4.8 billion International Monetary Fund loan, for which one condition is that Egypt implement strict measures that guarantee expenditure rationalizing and, partially, lifts on subsidies.

The minister added that the Cabinet would make the final decision on whether to apply the smartcard system after setting the state budget’s priorities.

Fuel subsidy allocations for 2012/13 are expected to reach LE120 billion, compared with LE114 billion allocated the previous fiscal year.