Fuel subsidies soared in 1Q FY 2024-25: The Madbouly government spent EGP 28.5 bn on fuel subsidies in 1Q of the current fiscal year, marking a 232% increase from the EGP 8.6 bn spent during the same period last year, according to an official document seen by EnterpriseAM. This spike comes despite two rounds of fuel price hikes implemented since the start of the fiscal year — and three rounds throughout the calendar year.

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Oil prices and a weak EGP hit the fuel subsidy bill hard: The surge in subsidies comes on the back of a global spike in oil prices and the EGP’s depreciation, which have both amplified the cost of fuel imports, a government source told EnterpriseAM. The Oil Ministry has ramped up imports to meet soaring summer demand, especially for mazut, gas, and other petroleum products.

FinMin stepped in to cover dues: The Finance Ministry provided an additional EGP 53 bn to the Oil Ministry to help it settle payments to foreign partners and secure imports for strategic stockpiling, the document showed. This process was expedited during August’s oil price dip, allowing state-owned Egyptian General Petroleum Corporation to lock in lower prices ahead of expected hikes from global production cuts, the source confirmed.

Remember: The government allocated EGP 154.5 bn to fuel subsidies for the current fiscal year in the budget for the FY 2024-25.

The government is negotiating with the International Monetary Fund to delay the fuel subsidy phase-out. Talks are currently underway to adjust the timeline and targets of previously agreed reforms as the Fund begins its much-anticipated fourth loan review, set to conclude in a little under two weeks.

Alas, we’re trying our best: The government is ramping up support for programs to shift vehicles to run on natural gas and electricity, as well as expanding residential gas connections. The report shows plans to convert 455k vehicles over the next four years, averaging 113k per year, and connect 1.2 mn homes to natural gas as a cheaper alternative to gas cylinders. Switching to natural gas could save citizens EGP 30k-49k annually, with added savings for the state budget, according to the document.

Efforts are already underway: Earlier this week, Finance Minister Ahmed Kouchouk told MPsthat the government is currently looking into a new initiative that aims to replace gasoline-fired car engines with electric motors or dual-fuel engines that primarily use natural gas.

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