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Egypt Running Out of Money for Subsidies

(Washington Post) Abigail Hauslohner - Mini-tankers of illegal diesel fuel have become ubiquitous in Egypt. Egypt's rapidly expanding black market for fuel, foodstuffs, and other commodities may be the most tangible illustration of just how badly its economy is failing. The prices of basic goods, like fuel and flour, have been fixed for decades, with Egypt pouring roughly a quarter of its GDP into a bloated and deeply inefficient national subsidy system each year. After two years of political turmoil, the government is quickly running out of money to foot the bill, and the supply of subsidized goods is drying up. Cairo drivers say they spend up to four hours waiting in line at state-subsidized gas stations that are almost sure to go dry by the afternoon. "Sometimes they will only sell half of what they have, and then they'll take the other half and sell it on the black market," said taxi driver Rafaat Mahmoud. Since waiting in line also means losing money, Mahmoud does what many other Egyptians do: He pays 22% more to buy diesel on the black market. Economists say the government of President Morsi has only enough cash to fund the subsidies for a few months. But it lacks the political support needed to carry out the massive spending cuts that economists say are necessary to keep Egypt afloat and secure a $4.8 billion IMF loan.
2013-04-25 00:00:00
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