The subsidies debate… is this the time to face the truth!

For over a month now, debate about government subsidies has dominated the political scene. The debate sparked after government officials announced that it is studying the possibility of cutting government subsidies to basic commodities, including petrol.

Newspapers have been awash with reports about the cancellation of the subsidies, and replacing them with cash subsidies to be granted to the poor category that really deserve them. However, the government’s move aroused fears among all society categories, which later on prompted President Hosni Mubarak to stress that there would be no cutting of subsidies.

Perhaps the energy subsidies top the list of all government expenditures; expected to hit LE50 billion at least in the new state budget, according to the Egyptian Minister of Petroleum Sameh Fahmy.

“The value of petroleum products expected to be consumed in the fiscal year 2008-2009 is estimated at $26 billion according to current prices,” said Fahmy in a session held at the Shura Council, the lower house of parliament, to discuss the issue.

While Fahmy pointed out that the oil sector would not resort to the ministry of finance to pay for the purchase of petroleum products, he stressed that the ministry of petroleum “will be able to pay $16 billion.” He added that the rest of sum will be paid by the surplus oil exports as well as the funds that would be available after increasing the prices of gas and oil to foreign partners.

Fahmy called upon all concerned parties to start a serious debate about the issue of subsidies “without any sensitivity”. He argued that had the government and the people failed to come up with a solution for this subsidies conundrum, the coming generations would face difficulties in obtaining oil, gas, and even water.

The skyrocketing oil prices combined with the fall of the value of the US dollar have constituted mounting pressures on the government’s budget. However, the Minister assured the people that “the energy subsidies will remain, but only for those who deserve them. We really have to rationalize energy consumption.”

Some members of the Shura Council called for canceling subsidies granted to steel and cement companies, which, they argue, achieved very high profits due to selling their products according to international rates. Other members called upon the ministry of petroleum to provide all local projects, especially petrochemical and fertilizers plants, with gas first and then export the rest.

Other members, like Essam Abdel-Sattar, gave voice to the public’s fears that a day might come when people would not find liquefied gas for household purposes.

With the discussions about the subsidies issue going on in the parliament and among ordinary people, the subsidies debate is highly unlikely to show any sign of abating soon.


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