Egypt to delay start of fuel subsidy rationing

Egypt’s government will delay a subsidized fuel-rationing plan by up to three months. The plan was initially set to take effect in April 2013 as part of austerity measures required to secure a US$4.8 billion loan from the International Monetary Fund (IMF), Egypt’s oil minister said on February 12.
The quotas, to be implemented through a system of smart cards allowing drivers a limited amount of subsidized fuel, were due to start just as the country is slated to hold parliamentary elections.
“The usage of smart cards for petroleum products will be implemented in the period between April and July,” Minister of Petroleum and Mineral Resources Osama Kamal told reporters at an industry event.
The Islamist-led administration that took office in July 2012 vowed to push through a reform of subsidies, which swallow as much as a quarter of the state budget, to lower its deficit. It eliminated subsidies on 95-octane gasoline, the highest grade available, late last year, prompting many motorists to switch to still-subsidized lower-octane fuel.
Egypt, which has endured two years of political instability since the ousting of President Hosni Mubarak, reached a preliminary agreement with the IMF in November 2012 for the US$4.8 billion loan to support its struggling economy.
Cutting the deficit is a condition to secure the loan. But the government is still considering steps to curb spending on fuel subsidies as well as changes to the tax system that would target the wealthy.
The finance minister said in late January that the government would complete a revised economic reform plan and invite the IMF to visit Egypt soon, but no date has been set and the country’s foreign reserves are dwindling.
Government subsidies for energy products for the first half of the financial year 2012-2013 cost around US$8.19 billion. Kamal said he expects the cost of energy subsidies for the full year to rise by 5% to US$17.59 billion, from US$16.86 billion last year. (February 12, 2013)