The government is planning to ramp up its efforts in the coming months to increase public awareness of the “gravity” of the issue with the energy subsidies programme “in its current form”, Minister of Planning Ashraf El-Araby said on Monday.
Energy subsidies currently comprise EGP 128bn of the state’s budget, according figures from the Ministry of Petroleum.
Hossam Arafat, chairman of the division of petroleum products at the Federation of Egyptian Industries, said that the government would be unable to tackle energy subsidies, “as the current fiscal year will end in four months, and they will have no time”.
El-Araby, during an interview with UAE-based CNBC Arabia satellite channel, said government spending on energy subsidies exceeds total spending on education, health and scientific research areas.
“80% of the energy subsidies reach the rich, so it doesn’t benefit those who are eligible,” El-Araby added.
According to Arafat, such figures are not accurate. “Businessmen who benefit from energy subsidies are in no need of public health and education services,” he said, stressing the need for “expenditures [to be] distributed equally between the rich and the poor”.
He qualified, however, that “the next government will not be able to cut energy subsidies, nor any other government, as this action would entail instability in the streets.”
The $12bn in Gulf aid received from Saudi Arabia, Kuwait and United Arab Emirates after the ouster of former president Mohamed Morsi in July, El-Araby said, would help reduce the budget deficit. “However, it must be paralleled by substantial reforms in the subsidies system in order to fix the problem in the medium and long terms,” he added.
In a report released by the Ministry of Finance in January, the energy subsidies programme was described as a “major distraction” that should be removed to reduce the budget deficit.
Egypt’s budget deficit recorded EGP 89.4bn in the first half of FY 2013/2014, representing 4.4% of annual GDP, the Ministry of Finance stated in January.
In FY 2012/2013, the budget deficit recorded EGP 204.9bn, comprising 14% of GDP. The government aims to reduce the budget gap to 10% of GDP by the end of the current fiscal year.
Minister of Finance Ahmed Galal pointed out in December that reducing spending on energy subsidies will not be implemented in a “shocking way”, but instead will be done gradually, with a plan being prepared in coordination with the Ministry of Petroleum.
Interim Prime Minister Hazem El-Beblawi said in November that the government would begin reducing fuel subsidies before it leaves office.