It is reported that Egypt's government will increase natural gas and electricity prices paid by heavy industries by 33% in January 2012 to narrow its growing budget deficit.
Mr Mumtaz al Saeed finance minister of Egypt said that the higher rates would be applied to steel, cement and ceramics industries and are part of a plan to shave EGP 20 billion off the deficit.
The uprising that unseated Hosni Mubarak in February has hammered Egypt's economy and the government has been struggling to find ways to finance its deficit as interest rates on some treasury debt soar to above 15%.
A local newspaper quoted the central bank governor last week as saying the deficit in the year that began on July 1st 2011 could be as high as RGP 182 billion as compared to EGP 134 billion the government had forecast in June. This would work out to about 11% of gross domestic product.
Economists say cutting energy subsidies, which represent about 20 of total spending, is one of the few practical options the country has to cut the deficit. Mr Saeed was quoted as saying the government would try not to hurt lower income groups.
He said that "The government will take care that the increases do not affect domestic fertilizer prices."
Mr Saeed said that the government planned to increase its revenue by combating tax evasion, stimulating the domestic economy and attracting more investment, both local and foreign. This included EGP 3 billion pounds it hoped to collect by cracking down on the sale of smuggled tobacco and alcohol products.
Mr Saeed said that the ruling military council would soon issue a decree to force domestic tobacco and alcohol product makers to put watermarks on their products to prevent the sale of untaxed products. The newspaper quoted him as saying the government planned to renegotiate notes it had sold to the state pensions authority. He added that "It has agreed to adjust the interest rate on EGP 201 billion pounds in outstanding notes that carry an interest rate of 8% at their maturity in five years."
The government had fallen EGP 140 billion behind in payments to the pensions authority and would repay this amount by issuing notes with an appropriate interest rate. The government was also studying the possibility of transferring state assets to the pensions authority in place of debt.
A delegation from the International Monetary Fund is due to meet Egyptian representatives in early January 2012 to discuss the country's economic problems, but has said any funding would have to be based on benchmarks that had broad political support. Egypt negotiated EGP 3 billion financing agreement with the IMF in June, only for the ruling military council to reject the agreement weeks later.
(Sourced from www.albawaba.com)
