Subsidies remain one of the most unique national problems, one that harks back to the Sadat years and even before.
It has been widely known for some years that subsidies constitute a pressing burden that Egypt could not sustain indefinitely. But, equally, governments have been beset with trepidation with regards to seriously addressing the issue, for fear of popular reaction.
In 2011, Egypt’s post-revolution finance minister, Hazem El-Biblawy, described the subsidy system as a “major mistake” that eats up one third of Egypt’s state budget (and is equal to about 10 per cent of Egypt's GDP), especially with more than one fifth of the budget already being spent on debt service.
In fact, Egypt spends more than two-thirds of its entire subsidies budget (one estimate is 71 per cent) on fuel for transportation and industry and domestic usage (such as butane containers for cooking) while the poorest Egyptians get little benefit from these transfers, with the remainder to cover all other national subsidy expenditures.
One illuminating example: while butane cylinders have been priced since 1991 at LE 2.75, government estimates their actual cost at LE80. With projected slow growth and an expected considerable budget deficit, the pain of such subsidy expenditures will be felt even more. The government has already set plans to slash fuel subsidies by 27 per cent, but there are worries that current plans might be too rushed, and that previous attempts at subsidy reform often largely ended as limited trials or changes on paper only.
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