Egypt : How to make LE89 bn in fuel subsidies disappear: Egyptians brace for steep price hikes | MadaMasr
▻https://www.madamasr.com/en/2018/04/17/feature/economy/how-to-make-le89-bn-in-fuel-subsidies-disappear-egyptians-brace-for-steep-
A sense of wariness overtakes many Egyptians from April to July each year, the three months in which Parliament discusses the upcoming state budget and makes decisions which may affect large swaths of the population. This year, that general worry about potential cuts is less undefined, as Egyptians are buckling up for an imminent hike in fuel prices.
Public attention to the subsidy allocations stipulated in the annual state budget has increased in recent years, since the government imposed an austerity program in 2014, which included subsidy cuts and new consumption taxes, in an effort to rein in the state’s growing budget deficit.
This year is likely to see steeper hikes in fuel prices than those seen in years past, as the government’s structural adjustment program, approved by the International Monetary Fund (IMF) in November 2016, comes to an end. Liberalizing fuel prices before the close of 2019 was one of the several terms of the three-year program, which must be met to ensure the continued dispersal of the IMF’s US$12 billion loan to the Egyptian government.
However, the structural adjustment program, which introduced a host of other measures with inflationary repercussions, got off to a rough start. Once the exchange rate was floated on November 3, 2016, the value of the Egyptian pound fell more than originally projected. This resulted in a significant rise in the nominal value of fuel subsidies in the state’s budget for the two fiscal years following the IMF agreement. While the nominal value of fuel subsidy allocations in the state budget seems to have drifted away from the targets initially stipulated in the agreement, documents released by the IMF after its second review of the program’s implementation at the close of 2017 show that the government remains determined to achieve the 2019 target of lifting fuel subsidies altogether.