The Clap
Egypt’s government is set to hedge against volatile oil prices to avoid a flashback of surging oil prices in 2022.
Claps Class
Hedging is when the government or an investor takes a position to reduce the risk of fluctuating prices of another asset.
What
Oil prices in 2022 surged to their highest levels historically, thanks to a supply squeeze resulting from the Russia-Ukraine war.
Fears of a recession and a decline in demand from China, one of the world’s largest importers of oil, saw oil prices decline slightly at the end of the year, but that did not stop oil from finishing at one of its highest levels since 2008.
So What
Increasing oil prices significantly impacts Egypt’s budget, given that Egypt is a net importer of oil. In addition, Egypt spent EGP 31bn in subsidies during Q1 of fiscal 2023, a whopping 350% more than the same period the year before.
