The House is worried about how rising oil prices will hit the 2018-19 budget
The House is worried about how rising oil prices will hit the 2018-19 budget: Meanwhile, the House of Representatives Budget Committee is debating whether to set aside more funds in case the government overshoots its 2018-19 budget deficit target, committee’s deputy chair Yasser Omar says. The committee is mulling whether to raise the effective overdraft limit to 6% of expenditures from 3-5% in the current draft of the budget, he suggested. This comes as global oil prices inch further toward USD 80. Next fiscal year’s budget assumes an oil price of USD 67/bbl and identifies rising prices as among the top risk to the government not meeting its budget targets. Pharos Research head Radwa El Swaify said that every USD 1 increase in global oil prices could see the government’s subsidy bill rise by an average of EGP 4 bn annually.
The committee plans to conclude its budget review by the start of June, committee chair Hussein Eissa said yesterday. The committee will hand its report over to the general assembly after having held 14 meetings with different ministers to discuss its details. The House of Representatives’ general assembly is now in recess until 3 June, Ahram Gate reports. House committees look set to meet during the recess to discuss pressing legislation, including the FY2018-19 state budget.
On oil prices, Morgan Stanley sees them at around USD 90 for the foreseeable future regardless of short-term political tensions. The investment bank sees this as the oil price by 2020 on the back of new shipping regulations taking effect, which should dramatically change the industry, according to Bloomberg. “We foresee a scramble for middle distillates that will drive crack spreads higher and drag oil prices with it,” wrote Morgan Stanley analysts. New International Maritime Organization rules call for ships to reduce the maximum sulfur content of their fuels to 0.5%, from 3.5% in most regions, which is expected to cause an oversupply in high-sulfur fuel. Bank of America predicts oil will get as high as USD 100 as early as next year.