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Wednesday, 29 November 2017

Is the government going to revise fuel subsidy cuts for FY2017-18?

Is the government going to revisit its calculations on fuel subsidy cuts for FY2017-18? The Finance Ministry will review the impact of higher crude prices on Egypt’s fuel subsidy bill for FY2017-18, said El Garhy at the press conference, according to Al Mal. It is yet unclear whether the statement signals that the government may move to cut fuel subsidies again if global oil prices continue to grow. Both El Garhy and Oil Minister Tarek El Molla had said the government has no plans to cut fuel subsidies again this fiscal year. The IMF had noted that higher global energy prices and regional political insecurity were the biggest risks facing progress on the economic reform program. El Garhy stated that the government will look to the next OPEC meeting on extending production cuts.

Background: Oil prices have surged since the start of Egypt’s fiscal year, rising nearly 25% to a peak of nearly USD 59 last Friday.

OPEC ministers meet tomorrow (agenda here, pdf) and will hold a conclave with their non-cartel counterparts. Look for an agreement that OPEC and Russia will extend their production cuts into 2018, but with an option to review the agreement in June. CNBC has a rather solid look at how oil prices could move in response the meeting. While crude has been flirting with the USD 60 mark, a shorter extension or a delayed decision could see it retreat toward the mid USD 50s.

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