The Ministry of Electricity sent a detailed memorandum to the cabinet regarding increasing its allocations after the Egyptian pound’s flotation. The memorandum included a study about the economic effects of the subsidy value with the increase of the price of the US dollar and fuel prices, the value-added tax (VAT), and banks lending prices which contributed to doubling financial burdens on the ministry.
Sources at the Ministry of Electricity said that the memorandum concluded that the kilowatt production cost per hour ranges between EGP 0.9-1.0, after the pound’s flotation and oil prices. The allocated subsidy to the sector will increase to more than EGP 60bn, an increase worth EGP 35bn more than the authorised subsidy in the current fiscal year.
The Egyptian Electricity Holding Company and Egyptian Electric Utility & Consumer Protection Regulatory Agency enumerated the influence of variables on the cost of the production through computational programmes, and a number of scenarios and proposals for increasing periods of electricity subsidies.
Sources added that the ministry’s burdens include roughly EGP 40bn in annual loans repaid by the Egyptian Electricity Holding Company due to the dollar price’s difference. The company borrows money according to the budget agreed upon before the pound’s flotation in which $1 equalled EGP 9.
Sabah Mashaly, first undersecretary of political performance and communication development at the Ministry of Electricity, said that the current prices will remain stable, and will not be increased before the beginning of the coming fiscal year, and the state will bear the high increase of the subsidy cost after the pound’s flotation.
Mashaly explained that the memorandum presented to the cabinet includes all scenarios and recommendations regarding the extension of the electricity subsidy or commitment to the restructuring programme of electricity prices. However the subsidy will definitely increase due to the recent changes.
President Abdel Fattah Al-Sisi previously emphasised that the state will bear the financial burdens of the electricity sector, and that citizens will not bear any increases.