Egypt sees falling oil prices seen as double edged sword

24 Dec 2014

(MENAFN) The Egyptian government is seeing the fall in global oil prices as a double edged sword to its economy as it will result in cutting the country’s fuel subsidy bill but that it could also affect the financial aid given to the country by its oil-exporting Gulf allies, Arab News reported.

Oil prices, which have lost almost 47 percent of their value since June, are expected to result in the Egyptian government saving about USD4.2 billion on fuel subsidies for its 86 million people in the 2014-15 fiscal year, though that is almost have the amount Egypt received from its Gulf allies in aid, particularly Saudi, the UAE and Kuwait.

These aids have amounted to USD10.6 billion in both cash and oil products coming from the Gulf in 2013-14, with these aids helping Egypt deal with its energy shortage crisis as well as giving it the ability to begin reforming its energy system, which has led it to become an energy importer instead of exporter in recent years.

“Falling oil prices positively impact fuel-importing countries like Egypt, in terms of lowering the subsidy burden and improving the available fiscal space for public investments or enhanced social spending. The sums provided to Egypt so far are relatively small when compared with the Gulf’s savings, so things would probably have to get a lot worse before they cut aid,” The World Bank said.