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Egypt budget curbs energy subsidies

Egypt announced deep cuts in energy subsidies in its budget for the 2014/15 fiscal year on Monday, a first step toward reducing the deficit after three years of political turmoil that have battered the economy.

Some 40 billion pounds ($5.59 billion) worth of savings were made by curbing planned spending on energy subsidies to 100.3 billion pounds in the next fiscal year, Finance Minister Hany Kadry Dimian told a news conference.

President Abdel Fattah Al Sisi rejected the first draft of the budget, which comes into effect on Tuesday, complaining that it was too extravagant and mounting debts would leave nothing for future generations.

Sisi approved on Sunday a tightened budget that seeks to reduce the deficit to 10 per cent of gross domestic product in the next fiscal year, from an expected shortfall of 12 per cent in the 2013/14 fiscal year that ended on Monday.

The budget deficit was around 14 per cent in the fiscal year ending June 2013.

“There is a bottleneck that we need to get through... There will be a burden that we have to all endure,” Dimian said.

Dimian did not announce exactly how the energy subsidy savings would be made and said there was no timeline for petroleum price increases or other reforms for the sector.

Egypt originally budgeted 99.6 billion pounds in energy subsidies for this fiscal year, but a finance ministry spokesman said this target had not been met and the actual spending on energy subsidies was closer to 144 billion pounds.

The spokesman said savings would come through redistribution and restructuring, without giving details.

Growth too weak

The country of 85 million is in dire need to increase revenue and curve spending since a popular uprising in 2011 ousted autocrat Hosni Mubarak and deterred foreign investors and tourists, once a major source of foreign currency.

Egypt’s economy grew a meagre 2.1 per cent last fiscal year, ending June 2013 and Gulf countries Saudi Arabia, the UAE and Kuwait have contributed billions in grants, loans and petroleum products.

Revenue in the new budget is expected rise by eight per cent to 548.6 billion pounds for the fiscal year ending June 2015, the minister said, while spending will climb by seven per cent to 789.4 billion pounds. Dimian said the Egyptian economy was expected to grow by more than three percent in the next fiscal year, after two percent expected in the current fiscal year.