CAIRO: Egypt's government announced on Wednesday that the new budget for the 2012/2013 fiscal year will see fuel subsidies cut by some 27 percent. The government added that they would introduce a coupon system to ensure the most needy receive subsidies. In recent years, the subsidies in the country have come under increased pressure as the wealthy continued to take subsidies and put it on the market without it reaching the impoverished segments of society. The government hopes the new moves will help boost the less off to receive the needed financial assistance. In the new budget, the government will reduce the amount spent on fuel subsidies to 70 billion Egyptian pounds from the previous 95 billion, which will account for roughly half of all subsidies spent by the government. Octane petrol, diesel and butane gas will all be distributed via a system of coupons and smart-cards in an attempt to keep a tighter rein on distribution and limit profiteering. In March the government floated the idea of reducing subsidies, but until now, nothing of substance had been made public. Gas stations in the country continue to see long lines, but according to a World Bank official, speaking on condition of anonymity, “this is the only way forward for Egypt to enter the global economy. “Subsidies are not good for investor confidence and while it cannot be done at once, reducing piece by piece would be a solid move for the country,” the official said. In the statement,the FEI said that “Egypt's long standing no limit energy subsidy policy has led to widespread misuse of the country's resources with low prices encouraging wastefulness.” The announcement continued to recommend the “gradual removal of energy subsidies over the next 5 to 7 years. FEI's findings follow a recent decision by Egypt's interim government to cut by a third energy subsidies provided to heavy industry.” While tentatively announced in early January, this is the first formal declaration from the Egyptian government that it is seriously looking at reducing subsidies. The Central Agency for Public Mobilization and Statistics (CAPMAS) says energy subsidies amount to some 100 billion Egyptian pounds and “represent about 20 percent of total government spending.” In comments published in late February, Egypt's Finance Minister Momtaz el-Said said that “the higher rates will be applied to steel, cement and ceramics industries,” allaying fears that all subsidies, including those for foodstuffs, would be cut.
