Egypt restructuring energy support... Experts: needed to pay random tax decisions

CAIRO

Since four years, Egypt has resorted to the restructuring of energy subsidies in both "electricity and petroleum products", which the Egyptian government adopted gradually during this period, on three occasions.

The Egyptian government justified its decision to structure the subsidy system as a major burden on the public budget. It believes that energy support should be channeled to education and health files, which suffer from a crisis in providing sufficient financial solvency to achieve better rates, especially in view of the general trend towards improved service in both countries.

Total energy subsidies are expected to be phased out by next fiscal year, June 2019, while petroleum subsidies currently stand at 89.075 million pounds, compared with 110 billion pounds (about 6.2 billion dollars) for the last fiscal year, The plan announced by Hisham Qandil, head of government under Mohamed Morsi, the former president comprised under the Muslim Brotherhood, in 2012, refuting anti-Egyptian propaganda under the leadership of President Abdel Fattah al-Sisi, regarding the lifting of government support for energy subsidies.

Egyptian Electricity Minister Dr. Mohamed Shaker announced on June 12 that electricity tariffs rose by an average of 26% for households. The electricity tariff in the high voltage stations used by the factories was about 41.8% while recent increases will be implemented starting from the new fiscal year 2018-2019.

Citizens perceive a contradiction between the statements of the Egyptian Minister of Electricity, which indicates a surplus of electricity, at a rate of about 20 MW, and the gradual increases in service prices, especially that when the service was in deficit,  prices were lesser. The Egyptian government did not hide its intention to gradually increase energy prices. In the new budget, initial estimates indicate a decline in petroleum subsidies by about 26% per cent and a 47% per cent decline in subsidies for electricity.

Observers are going to explain the successive increases in energy prices in Egypt to a bilateral program, the Egyptian government and the International Monetary Fund, agreed in advance, to be able to meet their entitlements to the Fund, which Egypt resorted to borrow about $ 12 billion, of which Egypt received 6 billion while waiting for the fourth tranche by next June.

Engineer Osama Kamal, the former Egyptian oil minister, told to Hawar news agency (ANHA) that the current increase in prices of petroleum and electricity has become urgent in view of the economic pressures exerted by the Egyptian economy. Revolution of January 25, which prompted the government to develop a comprehensive program of economic reform.

However, in the wake of these successive increases, there is concern for the citizens of Egypt. In the middle of last Ramadan, the water bill rose by only one week and the electricity tariff rose. In less than a week, gasoline prices rose, making additional burden on citizens, amid demands that their incomes should be increased so that they can pay these increases.

The former minister of oil, said that the deficit of the general budget requires the development of the need for a plan to get rid of the heavy burdens suffered by the Egyptian economy, especially as this increase will provide the value of 60 billion, noting that in the direction of the Egyptian state to expand social protection programs, It is necessary that support reaches the people in need of it.

Egyptian President Abdel Fattah al-Sisi, who sworn in as president for a second term in the country a few days ago, stressed the necessity to support the most needy segments. He called for focusing on education and health, especially as they are the infrastructure of countries seeking a comprehensive development renaissance.

According to Engineer Tarek al-Hadidi, former head of the Egyptian Petroleum Body, current prices despite the gradual increases in the allocations of petroleum products, but it is still the cheapest service globally, compared with major countries. In contrast, this increase is seen holding multiple benefits in the forefront, first of all, raising awareness among citizens to the importance of rationalization of consumption through a culture positively reflecting on his behavior and then on the community.

He stressed to Hawar news agency (ANHA) the importance of tolerance, especially in light of the challenges faced by the country, pointing out that the world oil prices exceeded the barrier of 80$  per barrel, speeded up the pace of recent applications of energy prices in Egypt.

Nevertheless, on June 5, the IMF sent warning messages to the Egyptian government and saw the need for Egypt to quickly implement its reform program. Otherwise, the budget would be at high risk in the coming period, under the world oil prices.

With regard to the reduction of the budget in light of the rationalization of expenditures, what is targeted to reduce the budget deficit, access to the safety department and the first, the budget deficit is about 8.4 percent in the next fiscal year, about 9.8 percent in the current fiscal year and 10.9 percent in the previous fiscal year.

While some criticize the Egyptian government's actions and decisions, especially at a time when the rate of inflation in the country significantly rise, which reflected negatively on the prices of goods and basic materials for the Egyptians, without taking measures to increase the levels of incomes of citizens, but a good number of them rely on the talk of President al-Sisi which promised to improve the lives of citizens in a short period, especially following the opening of a number of major national projects in the future of days.

However, economic researcher at the Institute of Economic Research, Ahmed Ali, sees the high energy tariff in Egypt and the low support directed to it is insufficient as the bill of energy support in the country is expected to reflect positively on the poor in Egypt, especially since the most needy sectors did not benefit adequately from this support

And added "Egypt is seeking to be a regional hub for energy in the region, benefiting from its unique strategic location, the country's diversification in power generation, and the discoveries of the Mediterranean gas that will lead to self-sufficiency by the end of the year."

"Egypt is paying a random tax for decisions made over the past decades. It was necessary to face these random decisions with sound decisions so that we can get rid of the consequences of the past."

According to these rises, there are demands for strict control of the markets that impose themselves at the present time, especially in light of expectations of rising inflation in the Egyptian market successively, which will affect the prices of commodities on which citizens depend, especially as some traders resorted to the country to put different prices in the absence of control of markets in the wake of these decisions, which angers citizens because of these manipulations.

(T/S)

ANHA