Al-Arabi: cutting energy subsidies to take place regardless of government in place – Al-Tahrir News Network


Minister of Planning Ashraf Al-Arabi denounced on Saturday any government intention to revoke an earlier decision to raise energy prices, saying that in light of a budget deficit of 14 per cent of GDP, “this is the right direction for Egypt to follow, regardless of the government in place.”

Al-Arabi said that reforming the Egyptian economy is crucial, most importantly restructuring the energy subsidies system which benefits the rich more than the poor, contradicting the notion of social justice. The interim government has amended some of the tax policies, Al-Arabi said.

He added that other legislative amendments are needed for Egypt to send signs to the world that it is serious about implementing an economic reform programme that would achieve social justice in a period from three to five years. This, he said, would help regain trust in the Egyptian economy and attract fresh investments.

source: Egyptian Center for Economic Studies

The delay in endorsing Egypt’s new state budget for the 2014/15 fiscal year (which starts on 1 July) has sparked controversy on whether the delay was caused by revising some of the austerity measures, such as cutting energy subsidies, which might ignite social unrest. Others have said that the delay might be attributed to the government seeking to impose even more stringent polices.

A Ministry of Finance source told TNN today that the government might amend the new budget, saying that the amendments will probably aim at realising “a tighter fiscal balance and rationalizing spending.”

Egypt’s new budget includes a cut in energy subsidies of around LE30 billion.

Energy subsidies eat up a fifth of government spending and successive governments after the 25 January Revolution in 2011 have been reluctant to reduce these subsidies, fearing public reaction. However, the interim administration recently announced bold plans to reduce the aid.