Middle East

Egypt to announce steps on subsidy reform before next month's election: minister

Riot police shield their faces from tear gas during clashes with students, who are supporters of the Muslim Brotherhood and ousted President Mohamed Mursi, in Cairo University at Kasr El Aini street in downtown Cairo April 9, 2014. (REUTERS/Amr Abdallah Dalsh)

TUNIS: Egypt will announce major stepstowards subsidy reform ahead of next month's presidentialelection, the country's minister of planning said on Wednesday.

"There is never a good time to start such reforms. The morewe delay them, the more the costs get higher," Ashraf al-Arabitold Reuters during a visit to Tunisia.

After the 2011 uprising that toppled Hosni Mubarak, alreadyhigh energy subsidy costs ballooned to a fifth of state spendingdue as the Egyptian pound plunged, and due to an expandingpopulation.

Egypt's Finance Minister said last month that spending onenergy subsidies next year will be 10-12 percent above the 130billion Egyptian pounds ($18.6 billion) budgeted for in thecurrent fiscal year, unless immediate reforms are made.

Planning minister Ashraf al-Arabi said the government wasseeking advice from international institutions on how torestructure its subsidy and taxation systems, as well as improveEgypt's credit rating.

"I am heading to Washington in the next few days to meetwith officials at the International Monetary Fund (IMF) and theWorld Bank ... But it is not on our agenda to seek loans fromthose institutions, we want some technical support for thereforms that we are planning," Al-Arabai said.

The steps on subsidy reforms would be progressive and wouldtake care of the poorest in society, he said, without givingdetails.

The government of Mohamed Morsi, which was toppled lastJuly, worked out an agreement with the IMF that would haveincluded austerity measures, higher taxes and a reduction insubsidies. It was never implemented.

Finance Minister Hany Kadry Dimian said last month thatrestructuring of the subsidy system needed to involve priceincreases and "rationalising distribution quotas".

Last year's energy subsidy bill was more than 120 billionEgyptian pounds, up from 115 billion the previous year. ($1 = 6.9748 Egyptian pounds)





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