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

Reuters News
Posted: Apr 09, 2014 11:35 AM

By Aziz El Yaakoubi

TUNIS (Reuters) - Egypt will announce major steps towards subsidy reform ahead of next month's presidential election, the country's minister of planning said on Wednesday.

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

After the 2011 uprising that toppled Hosni Mubarak, already high energy subsidy costs ballooned to a fifth of state spending due as the Egyptian pound plunged, and due to an expanding population.

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

Planning minister Ashraf al-Arabi said the government was seeking advice from international institutions on how to restructure its subsidy and taxation systems, as well as improve Egypt's credit rating.

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

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

The government of Mohamed Morsi, which was toppled last July, worked out an agreement with the IMF that would have included austerity measures, higher taxes and a reduction in subsidies. It was never implemented.

Finance Minister Hany Kadry Dimian said last month that restructuring of the subsidy system needed to involve price increases and "rationalising distribution quotas".

Last year's energy subsidy bill was more than 120 billion Egyptian pounds, up from 115 billion the previous year.

($1 = 6.9748 Egyptian pounds)

(Editing by Julia Payne and Susan Fenton)