Egypt to cut fuel subsidies to cost recovery level by December, IMF says
CAIRO - Egypt remains committed to lowering its energy subsidies to reach cost recovery by December as it works to reduce a wide current account deficit, the International Monetary Fund said on Wednesday.
Ivanna Hollar, the IMF mission chief for Egypt, told reporters the commitment to lower subsidies, made in the summer of 2024, remained unchanged.
"The authorities have committed to bring the price of fuel products to cost recovery by end-December 2025. That commitment has not changed and remains the prevailing commitment to bringing retail fuel prices to cost recovery levels," she said.
The IMF on Monday approved the disbursement of $1.2 billion to Egypt following completion of the fourth review of the country's $8 billion economic reform programme, after allowing Egypt to waive a primary budget surplus target.
Egypt's current account deficit mushroomed to 5.4% in the 2023/24 fiscal year, which ended in June.
"We still expect the current account to be relatively elevated this year, but then for the next fiscal year, 2025/26, to come down to about 3.5% of GDP deficit," Hollar said.
"Part of the contributing factors to the elevated current account deficit are not just the obstructions in the Suez Canal, but also the rather difficult situation in the energy sector which is contributing to a higher trade deficit," she said.
Suez Canal fees, a main source of foreign currency, plunged to $931 million in the third quarter of 2024 from $2.40 billion a year earlier, a victim of diverted shipping due to the war in Gaza.
Egypt still spends about 10 billion Egyptian pounds ($197 million) on fuel subsidies each month despite having raised prices three times last year, petroleum minister Karim Badawi said in October.
Prime minister Mostafa Madbouly said in televised remarks on Wednesday the government was continuing in its financial reform programme. It could not sell diesel 100% at cost, however, but would continue to subsidise it to some degree.
By the end of the year the government will have stopped petroleum subsidies being a financial strain, he said. ($1 = 50.6500 Egyptian pounds) (Reporting by Patrick Werr and Momen Said Atallah; Editing by Mark Potter, Alexandra Hudson)
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