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Egypt cabinet agrees to curb fuel subsidies
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Saturday, 24 Nov 2012

Reuters reported that Egypt's cabinet has approved the ending of subsidies on 95 octane gasoline and said it would set quotas for the sale of other subsidized fuel from April.

The announcement follows a preliminary deal reached with the International Monetary Fund for USD 4.8 billion loan to support the state's finances. The deal included an agreement to rein in wasteful spending on hefty fuel subsidies.

Many ordinary Egyptians are worried that the IMF deal will mean tough austerity measures, so these steps will test the public response. Economists say the terms are not onerous and the government insists steps will still protect the poor.

Mr Ashraf al Araby planning and international cooperation minister of Egypt said that 95 octane fuel the highest grade available would be sold at real cost and this would go into effect within days. There would be a consultation with the public on how to work out a quota system.

Mr Hisham Kandil PM of Egypt had said that removing the subsidy on 95-octane fuel would save the state EGP 55 million per year. Quotas for other subsidized fuel, operated by a system of smart cards would allow drivers enough fuel to get to and from work but not other journeys such as holidays.

The prime minister said that the quota for each driver or vehicle still had to be worked out to ensure it was fair and did not hurt the poor, who often drove older, less efficient cars. Drivers pay EGP 2.75 per liter for 95-octane fuel, well below the international price. The price of lower octane fuel, sold at an even bigger subsidy, is used more widely by the poor.

Source - Reuters


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