Ashraf al-Arabi, Egypt's minister of planning and international
cooperation, this week said the decision on raising gasoline prices
will be taken "very soon," but declined to provide further details.
Al-Arabi's sense of urgency suggested that for the first time in
years, Egypt was on the same page with the International Monetary
Fund, which has long urged the country to push through structural
reforms, such as gradually reducing costly subsidies.
After the 2011 uprising that toppled Hosni Mubarak, already high
energy subsidy costs ballooned to a fifth of state spending as the
Egyptian pound plunged, making imports more expensive.
Egypt's finance minister said last month that spending on energy
subsidies next year would be 10-12 percent above the 130 billion
Egyptian pounds ($19 billion) budgeted for, unless immediate reforms
"This energy subsidy system is unsustainable; we cannot afford (for)
this to continue," al-Arabi said in an interview on the sidelines of
the IMF-World Bank meetings in Washington.
"We don't have time to waste. ... It's better for Egypt to start
some of these measures at least before the presidential election,
just to pave the way for the coming president, to make his life
easier," he said.
Al-Arabi declined to specify by how much electricity prices would
rise, saying the issue was still under negotiation. He also
emphasized the price hikes would be gradual, and could take three to
five years to implement in full.
He said the government had agreed to allocate at least 15 percent of
its subsidy savings to social programs and the poor.
"This will benefit the poor, because we will take this from the rich
and reallocate it to the poor and social spending," he said. "So I
believe we have a good story to tell to the Egyptian people."
Egypt sells many energy products at prices substantially below the
cost of production. But one cash-strapped government after another
has resisted attacking the wasteful system, fearful that raising
fuel prices could spark unrest.
The previous government of Mohamed Morsi was already trying to cut
spending to contain a ballooning budget deficit, and was in
negotiations with the IMF for a loan program that would have
required Egypt to raise taxes and cut subsidies. But negotiations
were never completed before Morsi was toppled last July.
Since then, Egypt has relied on billions of dollars in aid from the
Gulf Arab states of Saudi Arabia, United Arab Emirates and Kuwait.
"What I think Egypt should do is use continued Gulf support to
create a breathing space, so that reform can be gradual, and you're
not forced into abrupt reforms by running out of money," Christopher
Jarvis, the IMF's mission chief for Egypt, said in an earlier
briefing with reporters.
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"I think the sooner reform is started, the better. But I see it as a
process that will take several years," he added.
Al-Arabi said Egypt plans to raise gas prices "very soon," declining
to elaborate further.
He said the government will make a bigger push to distribute smart
cards for fuel, part of a program to cut costs for the heavily
subsidized commodity by reducing so-called "leakages," or smuggling
and selling of gasoline on the black market.
The government in October said it would print 5 million smart cards
to give to motorists, who would use them to buy gasoline and diesel
at fuel stations, allowing the government to track and monitor
A smart card company contracted for the project alleged earlier this
month that the Egyptian government was taking too long to roll out
Al-Arabi said only 2 million or so cards have been distributed so
far, and the government plans to distribute the remaining cards in
the next two to three months.
"Once we have this smart card system, we will save at least 15 to 20
percent on leakages in the system," he said.
Egypt on Sunday also said it plans to introduce a smart card system
for subsidized bread by July.
Egyptians will vote on May 26-27 in a presidential election where
Abdel Fattah al-Sisi, the former army chief who deposed Morsi, is
expected to win easily.
Al-Arabi said any of Egypt's presidential candidates would support
moving forward on subsidy reforms and other changes to the economy.
"The Egyptian challenges are well known to everybody," he said. "We
keep talking about these same problems, at least in the last 30 or
40 years. ... It's time to reform."
(Editing by Eric Walsh)
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