Egypt spends over LE 122B on fuel subsidies, well above estimates

CAIRO – 21 September 2017: The actual value spent on petroleum subsidies in fiscal year 2016/17 amounted to LE 122.4 billion, Minister of Petroleum Tarek El-Molla said in a Thursday statement.

Molla explained that the government has purchased a worth of LE 204.3 billion ($11.6 billion) petroleum products to sell them in the domestic market for LE 81.9 billion at subsidized prices.

Egypt has consumed 78 million tons of petroleum products and natural gas in the previous fiscal year, while the petroleum sector has refined 25 million tons of crude oil and condensates in Egyptian refineries.

Last fiscal year, the unexpected rise in Brent prices put the Egyptian Ministry of Petroleum in a tight situation. It had to request additional allocations from the Ministry of Finance in order to meet its needs.

In FY 2016/17 budget, the fuel subsidies were LE 35 billion based on the calculations of $40 per barrel crude price. With that price swelling to above $50, the petroleum ministry exceeded its allocations, spending between LE 75-80 billion on the subsidies.

The deficit was further hit by the flotation of the Egyptian pound in November 2016, doubling the U.S. dollar exchange rate from LE 8.88 per dollar to a current average rate of LE 18.

To overcome this challenge, the Egyptian government announced in late June a decision to raise fuel prices. The price was raised 50 to 100 percent and the price of 80-octane gasoline soared from LE 1.60 ($0.08) to LE 3.65 per liter. In addition, the price for 92-octane increased from LE 3.50 to LE 5.00 per liter.