Egypt blames power cuts on funding squeeze

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Power cuts in Egypt are due to a lack of funds to buy fuel for power stations, the oil ministry said on Thursday, another sign that a government funding crunch is disrupting the wider economy.

Egypt has endured two years of political instability since the overthrow of President Hosni Mubarak and is trying to control a soaring budget deficit and secure a $4.8 billion loan from the IMF.

Power cuts have become more frequent as the government struggles to meet the country’s fuel supply needs. The problem is expected to worsen as summer approaches and home owners switch on their air conditioning.

In a statement, the oil ministry said the main reason for the power cuts was the state-run electricity sector’s “inability to organize the necessary financial liquidity to supply liquid fuels for some power stations.”

It did not name the types of fuel in short supply.

Some power stations had compensated by increasing their use of natural gas, the ministry added, and this had hit gas supplies at other stations. Gas, much of it produced in Egypt, is supplied via a national grid.

Shifting the blame

Shifting the blame to the Ministry of Electricity and Power, the Petroleum Ministry said it had written a number of letters to power industry officials in recent months warning that failure to arrange financing would disrupt fuel supplies.

It said fuel tankers had been waiting in Egyptian ports for more than three weeks, but the power sector’s inability to provide financing had “led to this situation and the weakness of the electricity generation capacities.”

On Tuesday, Oil Minister Osama Kamal told a local newspaper that the finance ministry had allocated $235 million to pay off a “long queue of tankers” waiting off the coast.

Egypt’s budget deficit is forecast to hit 10.9 percent of GDP in the year to the end of June, assuming economic reforms are made to curb spending. Without such reforms, the government says the deficit will hit 12.3 percent.

Shortages of state-subsidized diesel have paralyzed transportation in parts of the country. Spending on fuel subsidies accounts for around a fifth of the budget.
A government minister warned citizens this month against hoarding subsided diesel in their homes.