By: Heba El Kordy
Cairo – Mubasher: The increase in oil prices to over $80 per barrel (pb) has weighed on Egypt’s 2018/2019 budget, but the Organization of Petroleum Exporting Countries’ (OPEC) output hike decision would mitigate this negative effect.
Earlier on Monday, oil prices dropped, as Brent crudes declined 1.5% due to an expected production increase decided at the member meeting of OPEC last week.
Egypt’s Ministry of Finance (MoF) has revealed that a $1 increase in oil prices from the estimated amount ($67 pb) will add EGP 4 billion to the budget deficit.
Oil prices may vary between $66 and $70 pb in 2018, which could reduce the budget deficit by EGP 40-52 billion in the FY 18-19, analysts told Mubasher.
OPEC’s decision to up production will cut oil prices, which will meet the figures estimated in Egypt’s budget for the coming fiscal year, Mahmoud El Masry, macroeconomics analyst a Pharaohs Research said.
As for Egypt’s oil hedging, the analyst described it as a positive step, adding that the most populous Arab country has secured its oil supplies through agreements with Iraq and Saudi Arabia.
However, Esraa Ahmed, an economist at MubasherTrade, said that we should not be so optimistic about the positive results of OPEC decision, as the announced increase in oil output is just the limit set earlier by a group of OPEC and non-OPEC producers.
Also, the effect of OPEC’s prices reduction measure will not be as high as expected in Egypt's budget, Ahmed commented.
Translated by: Muhammad Khalid
