Egypt Delays Subsidy Reform With Economy On The Mend

Egypt’s economy is on the up, boosted by record gas output and power generation. This has enabled Cairo to delay liberalization of gasoline prices from December to April leading the IMF to hold back the penultimate $2bn of Egypt’s $12bn loan agreement.

Cairo spent E£45bn ($2.5bn) on transport fuel subsidies in 2H 2018, the first half of the country’s 2018-19 financial year. This puts the country bang on target to hit the 2018-19 budget plan of E£89bn ($5.2bn). It also marks a real-terms fall of 21% versus the E£45bn ($2.9bn) spend for 1H 2017-18 given 12% inflation.

But the commitment of Cairo, a substantial net importer of diesel and gasoline, to further cut subsidies has been brought into question by the decision to delay price liberalization for 95 Ron gasoline to April.

The delay, from December 2018, has led the IMF to postpone the disbursement of the fifth and penultimate $2bn tranche of a $12bn facility agreed in late 2016 ( MEES, 4 November 2016 ). (CONTINUED - 819 WORDS)

DATA INSIDE THIS ARTICLE

chart Egypt's Foreign Reserves Close 2018 At $42.6bn, A Record End-Year Level, But December Sees A Near-$2bn Drawdown, The Highest Since 2016 ($Bn, End Period)