The costs of fuel subsidies grew by 34% in the first half (H1) of the fiscal year (FY) 2017/18, to reach EGP 51bn, increasing from EGP 38bn, Minister of Petroleum Tarek El-Molla told Reuters on Wednesday. El-Molla added that despite the witnessed increase in subsidies costs, the subsidies bill is still EGP 4bn below the allocated budget for FY 2017/18. The government had budgeted an estimated EGP 110bn for fuel subsidies in the FY 2017/18 budget, although the Ministry of Petroleum expected that it will only need EGP 100-105bn, benefiting from the recent price hikes of petroleum products in June 2017. The cost of petroleum products is calculated on the basis of the average price of Brent crude at $52 per barrel and the average exchange rate of EGP 17.7 per US dollar. However, the current price of Brent crude stands at $67.23 per barrel, which is the main reason behind the increase in the fuel subsidies bill. The government raised fuel prices twice in a period of eight months, first in November 2016 then in June 2017, as part of the economic reform programme adopted by the government to secure an International Monetary Fund (IMF) loan. Earlier, in November 2017, the authorities announced that they would not consider any increase in fuel prices before 30 June 2018, the end of the current fiscal year, and that they expect to stop natural gas imports by the same date as well. In the IMF's latest review of the reform programme, the fund recommended Egypt to eliminate most fuel subsidies, as it believes that the current fuel prices are only benefiting the rich and that the government should replace them with cash subsidies for Egyptians most in need.
