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Thursday, 4 October 2018

Fuel subsidy bill could overshoot to EGP 100 bn in FY2018-19

EXCLUSIVE- Fuel subsidy bill could overshoot to EGP 100 bn in FY2018-19: Higher-than-forecast oil prices will could see Egypt’s fuel subsidy bill FY2018-19 jump to EGP 100 bn, up from USD 89 bn now in the budget, a government source told Enterprise yesterday. Compounding the issue: The potential for strain on the EGP from a strong USD, the source added. Every USD 10 increase in oil prices over the USD 67/bbl set in the FY2018-19 budget adds USD 1-1.2 bn to Egypt’s current account deficit, EFG Hermes’ Mohamed Abu Basha told Bloomberg earlier this week. Earlier this month, a government source had told us that Egypt is likely to miss its deficit reduction target this year, with the gap set to come in at something closer to 8.6% rather than the 8.4% originally forecast.

What about the fuel hedging strategy? The source told us that the Finance Ministry is yet to decide on whether to go for a hedging strategy it has put together. Officials had shelved the plan last week, Minister Mohamed Maait said. Our source tells us that for now, the ministry is effectively taking a watchful waiting approach and will look to maximize tax collection in the meantime.

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