Government to spend over $9 billion more on fuel subsidies

Egypt said it would spend $9.8 billion more than it budgeted on energy subsidies in the fiscal year ending June 30, in an indication of the crippling impact of the system on state finances according to Ibrahim Mahlab, interim prime minster.

The latest finance ministry data showed the budgeted amount for petroleum subsidies at 99.6 billion pounds. Officials had previously put this year’s spending on energy subsidies at 130 billion pounds.

Egypt is expecting a budget deficit of 12 percent near year. Energy prices in Egypt are among the lowest in the world, and the cash-strapped government spends more than a fifth of its budget keeping them down. Successive governments have called for reform but none have dared push through big price rises for fear of stoking unrest.

Artificially low prices for electricity, butane and fuel at filling stations provide little incentive for Egyptians to curb consumption, despite a fuel supply crisis that frequently causes blackouts.

Abdel Fattah al-Sisi, Egypt’s new president-elect said little about subsidy reform during last month’s election campaign aside from assuring voters that reform must be gradual.