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Egypt to delay fuel subsidy rationing

Source: Thomson Reuters Foundation - Tue, 12 Feb 2013 12:19 GMT
Author: Reuters
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CAIRO, Feb 12 (Reuters) - Egypt's government will delay by up to three months a rationing of subsidised fuel initially set for April as part of austerity measures to secure a ${esc.dollar}4.8 billion loan from the IMF, its oil minister said on Tuesday.

The quotas, to be implemented through a system of smart cards allowing drivers a limited amount of subsidised fuel, were due to start in April, just as the country is set to hold parliamentary elections.

"The usage of smart cards for petroleum products will be implemented in the period between April and July," Minister of Petroleum and Mineral Resources Osama Kamal told reporters on the sidelines of an industry event.

The Islamist-led administration that took office in July vowed to push through a reform of subsidies, which swallow as much as a quarter of the state budget, to lower its deficit but is reluctant to hurt voters.

It eliminated subsidies on 95-octane gasoline, the highest grade available, late last year, prompting many motorists to switch to subsidised lower-octane fuel.

Egypt, which has endured two years of political instability since the ousting of President Hosni Mubarak, reached a preliminary agreement with the IMF in November for the ${esc.dollar}4.8 billion loan to support its struggling economy.

Cutting the deficit is a condition to secure the loan. But the government is still considering steps to curb spending on fuel subsidies as well as changes to the tax system that would target the wealthy.

The finance minister said late last month that the government would complete a revised economic reform plan and invite the IMF to visit Egypt soon, but no date has been set and the country's foreign reserves are dwindling.

Government subsidies for energy products for the first half of the financial year (2012-2013) cost around 55 billion Egyptian pounds (${esc.dollar}8.19 billion).

Kamal said he expects the cost of energy subsidies for the full year to rise by 5 percent to 120 billion pounds from 115 pounds last year. (${esc.dollar}1 = 6.7141 Egyptian pounds) (Reporting by Asma Alsharif; Editing by Paul Taylor and Tom Pfeiffer)

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