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Wednesday, 11 April 2018

Gov’t to cut fuel subsidies, increase food subsidies in FY2018-19

BUDGET WATCH- More food subsidies, less spent on energy in FY2018-19: The government aims to reduce fuel subsidies by about 26% y-o-y to EGP 89.08 bn in FY2018-19, according to a government document referenced by Reuters. The budget also reduces electricity subsidies by almost half to EGP 16 bn from EGP 30 bn, the statement said. The substantial cut in electricity subsidies next year comes as the ministry plans to eliminate electricity subsidies by FY2020-2021. Egypt raised fuel and electricity prices by 50% and 42% respectively in July of last year, sending inflation shooting up. From what we’re hearing from MPs in the House of Representatives’ Budget Committee, these cuts are expected to come in one swoop. It is expected that these cuts would reduce budget costs by USD 2.4 bn (c. EGP 42 bn), says Reuters.

Food subsidies are set to move in the opposite direction, increasing 5% y-o-y to EGP 86.18 bn during the year, the newswire added. Overall, spending on social welfare and protection programs and commodity subsidies is expected to reach EGP 322 bn next fiscal year.

Export subsidies are also expected to see an increase in FY2018-19, according to Al Mal. These are expected to get as high as EGP 4 bn, up from EGP 2.6 bn in FY2017-18.

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