Madbouly talks oil hedging, commodities, and subsidies in latest presser: Prime Minister Moustafa Madbouly spoke about a wide range of issues during his weekly press conference, including oil hedging, subsidy reforms, and overdue payments to pharma companies, according to cabinet statements (here and here).

#1- Preparing for the worst case scenario: The government is working on a number of different plans to ensure the economy stays immune in case of potential escalations of the geopolitical tensions in the region. The government has stocked up on strategic reserves of essential commodities and we currently have a six-month supply of strategic reserves of sugar, wheat, and oil, according to Madbouly.

Fresh oil hedging contracts: The government has purchased a “large volume” fresh oil hedging contracts, Madbouly said without providing much detail on the matter.

Refresher: The former government used hedging contracts throughout the fiscal year 2023-24 to hedge against rising oil prices. A government official also previously told us that the measure could be extended to other strategic commodities.

#2- Fresh incentives for tourism developers: The government is looking into introducing a number of incentives for tourism developers over the coming couple of years, Madbouly said. The additional incentives aim to boost investment in the sector and see the government’s goal of adding new hotel rooms so the country can accommodate its yearly tourism footfall targets.

Remember: The tourism and finance ministries in April launched a subsidized loan program for hospitality companies worth up to EGP 50 bn. The funds aim to help companies build and operate new hotels, expand existing properties, and repurpose existing buildings into hotels.

#3- When can we expect the move to cash-based subsidies? Madbouly said that he hopes to see the initial phases of the implementation of cash-based subsidies at some point during the next fiscal year. Madbouly emphasized the importance of moving from in-kind to cash-based subsidies, explaining that the matter has already been discussed by the National Dialogue, which is now in talks with the government over how it could be implemented.

#4- Gov’t pays back overdue payments to pharma players: The government has paid some EGP 10 bn in overdue payments to pharma and medical supplies manufacturers over the last two months. The amount represents a “large chunk” of the due owed by the government to sector players, Madbouly said.

Tags: