Military Council and cabinet mull energy subsidy cuts

Ahram Online , Monday 27 Jun 2011

Egypt's ruling military approves the revised 2011/2012 budget as lawmakers consider additional cuts to costly energy spending for some industries

(Photo: Reuters)

Despite budget approval, Egypt’s cabinet is still considering ways to cut energy subsidies.

The Supreme Council of the Armed Forces (SCAF), Egypt’s de facto ruler since 11 February, has approved the proposed 2011/2012 state budget without any reservations, El-Shorouk newspaper reported on Monday.

“Even after approving the budget, we can still introduce additional savings,” said Ahmed El-Samman, the cabinet’s media advisor. He explained that the cabinet is currently studying individual industries to determine the appropriate energy pricing for each.

But concerns have been raised that any increase in energy pricing will result in hikes in prices of final product for consumers.

"From an economic point of view, it would be fair to take such a measure," said Omneia Helmy, senior economist at the Egyptian Center for Economic Studies (ECES).

At LE99 billion, energy subsidies (excluding electricity) take up more than 70 per cent of the LE138 billion allocated for subsidies -- 20 per cent of total expenditures listed in the draft budget.

El-Samman told Shorouk that no changes have been made to the most recent version of the budget, which was announced by the finance minister, Samir Radwan, last week. He denied that the SCAF had questioned the budget’s final form.

“The military council objected to the budget’s first draft, specifically the items on foreign borrowing and investment spending at a time when austere economic policies should be implemented,” he said.

Last Wednesday, Egypt's cabinet approved a new version of the 2011/2012 budget, introducing severe cuts to the draft proposed by the Ministry of Finance at the beginning of June.

Expenditure was reduced by LE27.3 billion, bringing the deficit to LE134.3 billion to reach 8.6 per cent of GDP instead of 11 per cent. 

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