São Paulo – Egypt is set to reduce spending with subsidies to the purchase of fuel in the 2015/2016 fiscal year due to oil’s lower price. According to information published by the government-run newspaper Al Ahram on Sunday (27th), Egypt’s minister of Petroleum, Tarek El-Molla, said that the country spent approximately USD 1.8 billion in Q1 of the current fiscal year with subsidies. In the same period of the previous fiscal year, spending stood at USD 2.3 billion. Egypt’s fiscal year starts on July 1st and ends June 30th of the following year.
The Arab country’s expectation is that the lower transfers for fuel consumption will help reduce the budget deficit. In the 2014/2015 fiscal year, the country set aside USD 9.5 billion to cover costs generated by these transfers. For the current period, 2015/2016, USD 8 billion were earmarked.
This year’s budget deficit should account to 8.9% of Egypt’s Gross Domestic Product (GDP), against 11.5% in the 2014/2015 period. Still according to information by the government-run newspaper, the government plans a 30% reduction of total fuel subsidies in the next five years.
Since last year, the price of oil products went up 78% in the pumps due to subsidy cuts. The country is spending less with these subsidies because the price of oil in the global market hit the lowest levels of the last 11 years. Last week, the oil barrel was priced at USD 35.98 on average.
On the other hand, the reduction in these fuel subsidy transfers is followed by a raise in the transfers designated for food consumption, power and social assistance. According to data from the Ministry of Finance, Egypt increased this type of spending in USD 1.6 billion between June and September.
*Translated by Sérgio Kakitani
