Egypt to slash energy subsidies | Fin24
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Egypt to slash energy subsidies

Dec 23 2014 09:00

Cairo - Egypt expects to slash its energy subsidies bill by 30% in the 2014/2015 fiscal year if global oil prices remain low, the oil ministry said on Monday, potentially lightening the burden on the cash-strapped country's finances.

Global oil prices have dropped dramatically over the past six months. Benchmark Brent crude, was trading at $60.66 per barrel on Monday, down more than 46% from the year's peak in June above $115.

"If low world oil prices continue during the second half (of the fiscal year) it is estimated that the year's total petroleum subsidies bill will decrease by about 30 billion Egyptian pounds ($4.2bn)," the ministry said in a statement on Monday.

"The expected savings still leave the state paying the large sum of £70bn for subsidies through the fiscal year."

Egypt had originally assumed oil prices of $109 to $110 a barrel in its 2014/2015 budget.

Egypt has struggled with soaring energy bills caused by high subsidies it provides on fuel for its population of 86m. The subsidies have helped turn Egypt from a net energy exporter into a net importer over the last few years.

The government slashed fuel subsidies in July to ease the burden on a swelling budget deficit, raising prices of mainstream fuel products by up to 78%.

The government under President Abdel Fattah al-Sisi has promised to take tough decisions to tackle Egypt's current account deficit and energy crisis, and more subsidy cuts are expected to be introduced over the coming years.

But lower oil prices could help ease the pressure on the government as it seeks to curb its deficit.

A senior Egyptian oil official had said late last month that Egypt would expect to save 25% on its energy subsidies bill as a result of cheaper global oil prices.

egypt  |  africa economy  |  oil


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