The theme of energy subsidies in Egypt has long been a subject of contentious debate for both economic and political reasons. Successive Egyptian governments have always been reluctant to alter the core structure of the subsidies since it may result in social unrest and antagonism among the poorer classes. It has always been perceived as part of the social contract between the people and the government. From an economic point of view, energy subsidies represent a huge financial and fiscal burden on Egyptian authorities and acts as a hurdle for major investments in the sphere of social and human development. Additionally, the structure of energy subsidies in Egypt benefits the economically advantaged groups rather than the poorer classes in the society through major energy subsidies for the likes of energy intensive industries, well-off urban residents and expensive vehicles. The economic impact of energy subsidies goes beyond the budget, as low energy prices distort economic decisions by encouraging excessive energy consumption, both now and in the future, as excessive investments are made in sectors that are intensive users of energy inputs. Energy subsidies reduce the incentive for energy efficiency, leading to…
