Egyptian government plans to cut energy subsidies by setting a universal limit on how much cheap fuel and cooking gas every household can buy, Petroleum Minister Osama Kamal told a newspaper on Sunday.
The government is seeking to reduce total spending on subsidies, which consume as much as a quarter of the state budget, to lower an unmanageable deficit and shift funds to health and education, but without saying precisely how or when it will happen.
The International Monetary Fund (IMF) has made it clear that a plan to reduce the deficit is necessary before negotiations can continue for the $4.8 billion loan the administration is hoping to get.
The plan outlined by Kamal would mean both wealthy and poor receive the same allocation of the subsidized fuel and would then pay a higher price for additional amounts consumed. The government "is committed to subsidizing petrol for only one car per family", said Kamal.
Each car with a maximum 1.6 liter engine would be allocated around 1,800 liters of subsidized fuel a year, enough to travel 60 kilometer per day, he said, a "suitable estimate for average daily consumption of private cars in Egypt". He was referring to 80-, 90- and 92-grade gasoline, whereas prices of higher-grade 95 gasoline would be raised to what the government pays for it.
Unspecified amounts of subsidized diesel would be issued for trucks, three-wheeler passenger vehicles, mini-buses and buses for transporting children to schools whose fees are regulated by the state, Kamal said. Additionally, each Egyptian family would receive 1.5 to 2 cylinders of fully subsidized butane cooking gas per month and further consumption would be partially subsidized.
"The government can't move prices in one go so as to avoid raising average inflation significantly," the minister said. "All citizens will be treated equally, so whoever has a luxury villa will be treated equally to the rest in receiving butane gas cylinders."
A growing population and high global prices pushed Egypt's petroleum product subsidy bill to LE28 billion ($4.59 billion) in the July-September quarter, up from 18 billion in the same period a year earlier, according to Kamal.
Source: Egypt Independant