Egypt's main short-term challenge will be to implement a raft of harsh reforms aimed at reducing the country's budget deficit to between 5 and 6 percent of national output within five years, Abdullah Shehata, advisor to Egypt's finance minister, was quoted as saying by Al-Ahram's Arabic-language news website on Tuesday.
Egypt, which is in the process finalising an economic reform programme upon which a long-awaited $4.8 billion IMF loan is conditional, expects its budget deficit to hit 11.5 percent of GDP – roughly LE200 billion (some $28.75 billion) – by the end of the current fiscal year in June.
Speaking at the 13th Doha Forum in Doha, Qatar on Tuesday evening, Shehata asserted that the Egyptian government was obliged to implement the reforms, regardless of the IMF loan's requirements.
He added that energy subsidies in Egypt represented one and a half times the amount of government expenditure on healthcare and education combined, amounting to a whopping LE118 billion (roughly $16.9 billion) in the current fiscal year. The healthcare and education sectors, meanwhile, were only allocated a combined total of LE80 billion (roughly $11.4 billion) for the same period.
The government intends to rationalise fuel consumption through introducing a smart-card system by October of this year, according to newly-appointed finance minister Fayad Abdel-Moneim.
Former petroleum minister Osama Kamal told Ahram Online in April that Egypt, which spent LE120 billion in fuel subsidies this fiscal year, hopes the smart-card system will save some LE30 billion (roughly $4.3 billion) out of Egypt's fuel subsidy bill, which the government expects to reach LE99.6 billion (roughly $14.2 billion) in the coming 2013/14 fiscal year – some 15 percent of total projected public expenditure.
Kamal, for his part, believes that the smuggling and illicit sale of subsidised fuel on Egypt's black market constitute a primary reason for recent diesel shortages.
Shehata stressed the government's determination to combat the smuggling of subsidised petroleum products outside Egypt, claiming that 15 to 20 percent of such products were being illegally smuggled to Turkey, Cyprus and Palestine.
Regarding the fate of the proposed IMF loan, Shehata asserted that agreement would soon be reached on the terms of the proposed facility.
"The finance ministry and central bank are making the necessary preparations for the implementation of the reforms, and we're making sure the [government's economic] programme is ready to be carried out and is accepted by the public," Shehata said, affirming that the programme had been devised entirely by Egyptian officials.