CAIRO: Egypt announced deep cuts in energy subsidies in its budget for the 2014/15 fiscal year on Monday, a first step toward reducing the deficit after three years of political turmoil that have battered the economy.
Some 40 billion pounds ($5.59 billion) worth of savings were made by curbing planned spending on energy subsidies to 100.3 billion pounds in the next fiscal year, Finance Minister Hany Kadry Dimian told a news conference.
President Abdel Fattah al-Sisi rejected the first draft of the budget, which comes into effect on Tuesday, complaining that it was too extravagant and mounting debts would leave nothing for future generations.
Sisi approved on Sunday a tightened budget that seeks to reduce the deficit to 10 percent of gross domestic product in the next fiscal year, from an expected shortfall of 12 percent in the 2013/14 fiscal year that ended on Monday.
Dimian did not announce exactly how the energy subsidy savings would be made and said there was no timeline for petroleum price increases or other reforms for the sector.
Egypt originally budgeted 99.6 billion pounds in energy subsidies for this fiscal year, but a finance ministry spokesman said this target had not been met and the actual spending on energy subsidies was closer to 144 billion pounds.
The spokesman said savings would come through redistribution and restructuring, without giving details.
Dimian said the Egyptian economy was expected to grow by more than 3 percent in the next fiscal year, which is in line with previous forecasts and too low to create enough jobs for the rapidly growing population in this country of 86 million.
The turmoil of the past three years, with two presidents overthrown and hundreds of people killed in the streets, has hit the tourist industry and investment, worsening a huge unemployment problem and pushing up the budget deficit.
Subsidy cuts could prove unpopular with many ordinary Egyptians struggling to make ends meet, particularly during the month of Ramadan, when Muslims fast from dawn until dusk. (Reuters)