Tuesday, May 21, 2013

By Summer Said

DUBAI--Egypt, which needs to cut government expenditure, plans to introduce ration cards for subsidized fuel by September, the country's new oil minister Sherif Haddara said Tuesday.

"We have the cards and the machines... citizens will get the cards by August or September," Mr. Haddara, said, according to state television.

However, Mr. Haddara, who was appointed oil minister earlier this month, did not specify the amount of fuel that will be allocated to each driver.

Earlier this year, the cash-strapped Egyptian government said it plans to introduce the fuel cards in July and will provide 150 liters of subsidized fuel per month for each private car with engines that don't exceed 1600cc and once the quota is reached, fuel will be sold only at production cost. Taxi, bus and truck drivers were expected to be awarded a quota of between 30 and 250 liters of subsidized fuel a day, it has said.

Many Egyptians have already been using ration cards for decades to buy rice, cooking oil, sugar, tea and pasta.

Egypt's former oil minister Osama Kamal has repeatedly warned that by the end of the current fiscal year, the amount allocated for energy subsidies will surge to more than 120 billion Egyptian pounds ($17.25 billion) from the initially budgeted EGP70B due to higher consumption and a sharp fall in the pound.

If no curbs are enforced on subsidies and consumption, the amount is expected to rise to about EGP135 billion, he has said.

Egypt has been facing a diesel shortage since last year, leading to rising food costs, long queues at filling stations and electricity blackouts. The fuel crisis has compounded broader economic problems in the country, which in 2011 overthrew the government of Hosni Mubarak in a popular uprising, paving the way for the electoral victory of Mr. Morsi's Muslim Brotherhood.

The government is short of funds and has been negotiating with the International Monetary Fund over a $4.8 billion loan, which analysts and investors say is critical for the country.

The IMF wants to see Egypt reduce its subsidy spending, as part of a reform plan for the loan, say those close to the talks. But any subsidy changes will likely only enrage further the legions of poor who rely daily on cheap fuel, making the already uncomfortable summer months all that more unbearable. IMF officials left Cairo last month without agreeing on the terms of the loan.

Write to Summer Said at summer.said@dowjones.com

(END) Dow Jones Newswires

21-05-13 1331GMT