Egypt's poor should be compensated with cash for subsidy cuts: IMF official

Ahram Online, Wednesday 17 Apr 2013

No deal has yet been reached on the planned $4.8 billion IMF loan to Egypt

Carlo Cottarelli, the director of fiscal affairs department of IMF

Egypt’s poor need to be compensated in cash transfers for the removal of subsidies, said an official from the International Monetary Fund (IMF) at a press conference in Washington on Tuesday.

Carlo Cotterelli, director in the fiscal affairs department of the IMF, said that although the lower-income segment of the Egyptian population benefits from subsidies, it is critical to cut subsidies as they benefit the rich more than the poor.

“You need to compensate the poor for the loss of subsidies, but at the same time, you also save money because you are not subsidising the rich. That is basically the advantage of eliminating subsidies and replacing them with cash transfers,” Cotterelli told reporters.

Cotterelli said that trimming subsidies would lead to price hikes in commodities, but said that compensation for the poor would allow them to afford the increases.

For her part, Martine Guerguil, assistant director of the fiscal affairs department, said that along with reforming subsidies, reconsidering revenue and ensuring there are no undue loopholes in the tax capacity are important elements to reduce the budget deficit.

On Wednesday, a high-level delegation of Egyptian officials left Cairo, bound for Washington DC to take part in the semi-annual meetings of the IMF and World Bank later this week.

An IMF technical team left Cairo on Tuesday after two weeks of talks with Egyptian officials yielded no conclusive outcome regarding its eluded $4.8 billion loan deal with Egypt.

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