Gov’t preparing to tweak budget for higher oil prices?
EXCLUSIVE- Gov’t preparing to tweak budget for higher oil prices? The Ismail Cabinet will decide in the coming two weeks whether to raise the overdraft limit in the FY2017-18 budget to give itself breathing room in the context of climbing oil prices, Vice Minister of Finance Mohamed Maait tells Enterprise. The budget was originally drafted with oil at USD 60-64 / bbl and assumed an average cost of USD 67 per bbl — but the black stuff has since hit USD 80 in trading on Thursday. Every USD 1 increase in the price of a barrel of oil raises government energy spending EGP 3-4 bn, Maait added. The government had budgeted EGP 110 bn for energy subsidy spending at an average oil price of USD 55/bbl.
Tightening consumption of petroleum products will help mitigate the impact of rising oil prices on the next budget, Finance Minister Amr El Garhy told the press on Thursday, Al Shorouk reports.
Here’s how (in part): An downstream energy industry insider pointed out to us recently that the USD 1.2 bn the government is spending to accelerate household connections to the natural gas grid will be key. A typical Egyptian low-to-middle income household preparing three meals daily consumes roughly two LPG cylinders a month at a subsidized cost of EGP 60 per month against a market rate north of EGP 100. The same household connected to the national distribution grid would consume gas worth EGP 30-40 per month, a savings of about 60%. Toss in the natural impact on consumption of higher gasoline, diesel and electricity prices — all expected to rise starting 1 July — and you start to get the picture.
The House of Representatives’ Budget and Planning Committee, meanwhile, has recommended that spending on health, education, railways, and the State Information Service be increased in the FY2018-19 budget, Rep. Yasser Omar tells Al Mal. The committee seeks to increase spending on health, specifically university hospitals, by EGP 10 bn, according to Omar. Health Minister Ahmed Rady reportedly said last week that the Ismail Cabinet agreed to give the health ministry an additional EGP 2.6 bn next year. The Budget Committee is expected to conclude its review at the start of June.