Egypt's new government will continue fuel subsidy reform: Moody's



Thu, 21 Jun 2018 - 02:46 GMT


Thu, 21 Jun 2018 - 02:46 GMT

 Moody's - REUTERS

Moody's - REUTERS

CAIRO – 21 June 2018: The rise in fuel prices in Egypt is credit positive, Moody’s Investors Service said on Thursday.

Moody’s said in a report that the price hike will help Egypt meet the agreed target for a fiscal deficit of 8.4 percent of GDP in fiscal 2018/2019, compared to around 9.8 percent of GDP in 2017/2018.

It added that the new prices will help in reducing the overall subsidy bill from its estimate of 7.5 percent of GDP in 2018 to 6.5 percent in 2019.

The prices were increased by 35 percent to 66.6 percent with immediate effect as a part of the reform agenda of the Egyptian economy agreed with the international Monetary Fund (IMF), Moody’s stated.

It referred to Minister of Finance Mohamed Ma’it statement as he said earlier this week the continuity of the high oil prices would raise the subsidy bill in the budget to LE 180 billion, which would affect the allocations to health and education and efforts to provide new job opportunities, stating that these are the reasons behind moving fuel prices.

The Cabinet announced on Saturday, which corresponds to the second day of Eid el-Fitr, the new prices of the fuel, to decrease its subsidy gradually.

Gasoline 95 prices went up from LE 6.6 ($ 0.37) per liter to LE 7.7, while 92 octane gasoline prices amounted to LE 6.75 instead of LE 5 per liter. Prices of gasoline 80's liter increased to LE 5.5 instead of LE 3.65, the newly-appointed government said in its first move since taking oath Thursday.

The price of diesel will be LE 5.5 a liter instead of LE 3.65, while the price of natural gas used for vehicles rose to LE 2.75 per cubic meter instead of LE 2.

Meanwhile, the government has announced raising the price of the cooking gas cylinder to LE 50 instead of LE 30 and the commercial gas cylinder's prices surged to LE 100 instead of LE 60.

Egypt embarked on a bold economic reform program that included the introduction of taxes, such as the value-added tax (VAT), and cutting energy subsidies, with the aim of trimming the budget deficit.

The country has floated its currency in November 2016 before it clinched a $12 billion loan from the International Monetary Fund (IMF).

The IMF loan helped the state’s foreign reserves to rebound by receiving the first three tranches of the loan with a total value of $6.08 billion.



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