Breakfast Wrap: All Talk, No Action On Egypt Subsidies, Debt & Tourism Numbers

All talk an no action? That’s how Rebel Economy views any announcements on energy subsidies these days.  Promises have been made for years but the revolution put this inefficient in question because of the huge strain on the government budget.

But regimes under pressure from tough economic conditions and high oil prices have pulled back from existing subsidy cut plans or shied away from new ones for fear of angering their newly emboldened populations, energy insiders told me for this FT story I wrote recently.

This morning’s news on the government’s energy subsidy strategy:

The Egyptian government faced a tough challenge to implement a coupon plan designed to cut massive energy subsidies which eat up around a quarter of government spending, Egypt’s oil minister, Osama Kamel, was quoted as saying in Al Watan newspaper on Sunday.

Kamal said introducing the programme would need “strong political will”, unlike previous governments which baulked at taking unpopular austerity measures.

The oil minister told al-Watan that the government had a produced a database of about 65 million people, or 12 million families, who would get coupons for two cylinders of cooking gas a month at the current subsidised rate.  The subsidy on 95 octane gasoline, which the state sells at 2.75 pounds per litre and is bought mostly from the rich, should be removed and it should be sold at its free-market cost of 4.85 pounds, Kamel was cited as saying.

Egypt’s government has drafted a plan to cut energy subsidies by $4.2 billion, local Egyptian newspaper Al Masry Al Youm reported this morning, citing an unidentified official.

This is why Egypt must cut subsides now.

Egypt is apparently the third most indebted country in the world, Daily News Egypt cited the Economist magazine as saying. Egyptian public debt currently stands at $206.999 billion, which amounts to 82 per cent of GDP. The current economic status could drive Egypt into full financial crisis, the magazine reported.

Interest rates on the Egyptian government’s debt have fallen from historic highs in recent weeks as optimism grows that it will secure help for a struggling economy from the International Monetary Fund and other foreign donors.

The average yields on 4.5 billion Egyptian pounds of 91- and 266-day treasury bills fell sharply at a central bank auction on Sunday.

Egypt tourist arrivals are up 14.4% to 1 million in August as the political turmoil that once scared tourists away has begun to ease.

Egypt has struggled to recover from a sharp drop in tourists and foreign investors, two vital sources of foreign currency.  Once popular with frontier market investors with growth of about 7% a year, the economy has sputtered along, growing by just 2% in the financial year that ended in June.

This Reuters report updates the tourism situation, bringing attention to government initiatives to revive the sector.

Qatar National Bank has dropped its interest in buying the Egyptian operations of France’s BNP Paribas, favouring instead the assets of Societe Generale in the country due to SocGen’s bigger retail banking network, Zawya Dow Jones reported Sunday.

In an interesting development for Saudi Aramco, which was recently subject to a hacking attack, the world’s largest oil company will open an office in Seoul next month to enter the lucrative Korean energy market

Saudi Aramco plans to hire staff to sell crude oil and LPG but also to bring aboard experts in renewable energy and energy market analysts. So far Aramco’s investments here were overseen by offices in China or Japan.

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