Sunday, February 17, 2013

Diesel Shortages in Egypt

Diesel fuel shortages push Egypt ever closer to the precipice: 
Diesel supplies are drying up as a cash-strapped government struggles to cap a mounting bill for subsidies it has promised the IMF it will reform to secure an elusive $4.8 billion loan desperately needed to keep a sagging economy afloat.

The situation appears near breakdown with growing shortages, unsustainable subsidies and foreign exchange reserves running out, raising the risk that fuel bottlenecks lead to food shortages and pose a risk to political stability.
Foreign reserves are down below $15 billion, less than three months' imports, despite deposits from Qatar and Turkey. The Egyptian pound has lost 8 percent of its value this year and a black market has emerged for hard currency.
The nation's strategic reserve of diesel fuel is down to three days' supply, the official MENA news agency quoted a government official as saying last week. Bakeries that use diesel to make staple subsidized bread have been told to keep 10 days' fuel supply but not all have the capacity.
The Muslim Brotherhood-led government of President Mohamed Mursi this week postponed for up to three months a rationing system for subsidized fuel due to start in April in what looks like an attempt to avoid upsetting voters before parliamentary elections due that month.

But reforms cannot be delayed for long, economists say.
"Fuel shortages are a symptom of the strains on Egypt's unsustainable subsidy system," said Simon Kitchen, an economist at EFG-Hermes in Cairo.

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