CAIRO: It has been long talked about in Egypt, ending energy subsidies in the country, but the government has refused, most likely for fear of widespread unrest and possible protests. Now, however, Cairo appears ready to push forward on a plan that would begin to see subsidies phased out, starting in July, the daily al-Borsa newspaper quoted Minister of Trade Rachid Mohamed Rachid. According to the minister, the country will resume the gradual elimination of energy subsidies to industries that are not energy intensive. The government had suspended a plan to reduce the subsidies to companies after the 2008 global economic crisis hit. Analysts have long said Egypt must end all subsidies if the country is to move forward in the global economy, but thus far, only business has been targeted for the reduction. “With the start of the new fiscal year, the government will resume the policy it laid down three years ago to eliminate energy subsidies to factories,” the paper quoted Rachid as saying. Egypt's fiscal year starts July 1. “Egypt will eventually have to face the reality that in order to compete on the global market, all subsidies will have to be removed,” said an official from the IFC, the World Bank's private hand, in comments to Bikya Masr last year. He argued that “although it will be tough initially, in the long run, it will create more competition and increase the overall quality of life in the country.” Energy-intensive industries already receive energy at international prices, al-Borsa cited the minister as saying. “The second half of the current year will witness the first stage of price rises, then annual increases will be implemented to reach world prices,” Rachid said. According to the report, cement companies obtaining licenses in the upcoming period will be responsible for providing their own energy. They may resort to importing oil and gas if needed, Rachid said. Energy subsidies cost the government 60 billion Egyptian pounds in fiscal year 2007/08, up from 57 billion pounds in fiscal 2006/07. Of this, the government spent 20 billion pounds on gas subsidies to energy-intensive companies. Egypt's budget deficit rose to 65 billion pounds in the seven months to January 31, up from 39 billion pounds in the same period a year earlier, a Finance Ministry report said earlier this month. BM
