The Saudi Gazette reported that the government of Egypt plans to cut energy subsidies by USD 4.2 billion in an effort to boost their spending power. The government has already drafted a plan to reduce energy subsidies in the country.

Mr Hisham Qandil PM of Egypt submitted the proposal to President Mr Mohamed Morsi and the government is debating whether to implement the cuts next month or to wait until after parliamentary elections.

It comes as Cairo continues to hope for USD 4.8 billion loan from the International Monetary Fund as the country's economic woes continue. Before the loan can be approved however the IMF is pushing the Egyptian government to make tangible steps in the negotiation process and cut subsidies.

The announcement is not likely to go over well with a vast majority of the population that relies heavily on subsidized goods including petrol and other energy subsidies.

Gas stations in the country continue to see long lines but according to a World Bank official speaking on condition of anonymity this is the only way forward for Egypt to enter the global economy. Subsidies are not good for investor confidence and while it cannot be done at once, reducing piece by piece would be a solid move for the country.

The Central Agency for Public Mobilization and Statistics said that energy subsidies amount to some EGP 100 billion and represent about 20% of total government spending. For low income Egyptians the ending of subsidies could mean massive economic hardship.

Mr Amr Mohsen local supermarket owner Cairo said that “If the government cuts energy subsidies his profits would dwindle and he might not be able to survive. I have a nice shop and it is doing all right. But with the rising of food costs in the country, times have been tough. If the government ends energy subsidies for fuel and electricity, my bills will get even higher and I don't know if I can manage that really and still have enough to provide for my family."

Source - The Saudi Gazette

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