8:00 pm
Tuesday 10 January 2023
Books – Mustafa Eid:
The Egyptian government has pledged to continuously implement the automatic petroleum pricing mechanism, reflecting international oil price movements in domestic fuel prices, as part of the cooperation program with the International Monetary Fund for Economic Reform, which is recently been agreed.
According to a fund report on the details of the deal, released on Tuesday, the government said it would refrain from cutting fuel prices until the fuel subsidy for products covered by the mechanism (i.e. all products except butane gas and bakery fuel) from the previous tax year is cancelled.
The government has kept oil prices low over the past year compared to what they should be if cost increases are applied in the two factors of the price mechanism application, be it international oil prices or the exchange rate the dollar against the pound, which has seen a significant rally, according to the fund.
The IMF expects fuel subsidies to reach £97bn in the current fiscal year, up from £60bn, an increase of 61.7%, provided they remain relatively stable in subsequent years around £100 billion level.
The government said implementing a pricing mechanism that reflects international prices would help consolidate the progress made in fuel subsidy reform in recent years, protect valuable budgetary resources and assist decarbonisation efforts of the government.
“The savings from this measure help us redirect resources towards targeted support that is significantly more effective at protecting those in need.”
He added: “We will improve communication around the mechanism by explaining the rationale for pricing decisions. Our financial accounts will record the full scope of any fuel subsidies and any liabilities to General Petroleum Corporation will be disclosed as part of the annual report on the arrears”.
The government has indicated that to help mitigate the impact of rising fuel prices on vulnerable groups, targeted support will be stepped up through existing social programs such as solidarity, dignity and ration cards.
He said: “We also expect Parliament to soon approve an amendment to the Income Tax Act that raises the personal income tax exemption threshold providing relief for the middle-income population from general increases in the prices of goods and services With the same objective, we are developing further measures to support families, within the limits of the available budgetary space.
