World Bank Note:                                                                                      April 10, 2017
         Note 2: Proposed Targeting Mechanisms for Public Transport Subsidies in Egypt

Background:

The Government of Egypt (GoE), like in many of the countries in the MENA region, has applied large energy
and food subsidies for decades, justified as a means of augmenting the incomes of lower income and
middle-class households. The costs of doing so have been a large burden on the country, representing a
quarter of the state budget1. For this reason, the GoE introduced major reforms to phase-out energy
subsidies through a staged series of increases in the officially mandated prices for petroleum, gas and
electricity.

In November 2016, the GoE further decided to float the Egyptian pound for the first time in its history.
This bold decision was necessary for the dire economic situation of the country, the result of years of
political instability. However, with the floatation of the pound, Egypt’s fuel subsidy bill jumped 46 percent
to $2.11 billion.2

Public Transport:

With Egypt dedicated to phasing out energy subsidies as part of a reform program supported by a $12
billion IMF loan deal, we can only expect public transportation prices to significantly increase in the near
future. Both public and privately owned public transport operators will be forced to increase their fares.
A recent example is the Cairo Metro, which doubled its fare a few months ago.3

Public transport systems need to balance financial sustainability4 and the ability to provide affordable
services, in particular to lower-income populations. In reality, meeting both goals is difficult, with
transport systems either relying on high levels of non-targeted subsidies or charging transit fares that
are too expensive for the city’s poor.

The objective of this note is to assist the Government of Egypt in identifying innovative targeting
mechanisms of Egyptian Public Transport users to receive mobility subsidies based on their financial
status. Car owners will also receive a fuel subsidy to partially mitigate the subsidy reductions on fuel.




1
  http://www.madamasr.com/en/2016/11/03/news/economy/egypt-to-raise-fuel-prices-by-up-to-47-percent-at-
midnight/
2
  http://af.reuters.com/article/energyOilNews/idAFC6N1BK020
3
  http://english.ahram.org.eg/NewsContent/1/64/261629/Egypt/Politics-/Egypts-Metro-ticket-price-increase-to-
EGP--impleme.aspx
4See the note “General Principles of Fares Pricing Reform with a View to Cairo’s Metro Pricing Reform� dated January 2016 for
further details on fare policies in Public Transport in Cairo.
      World Bank Note:                                                                      April 10, 2017
Proposed targeting mechanisms for Public Transport subsidies:

1.   For Public Transport users not owning a car (under-privileged)

A mobility subsidy card could be issued for Public Transport users not owning a car. These could be
identified as all persons not having a registered car in their name. The mobility card would subsidize all
modes of Public Transport fares (metro, public buses, tram, trains, etc.) to this group of persons.

The Greater Cairo Transport Regulatory Authority (GCTRA) could be the authority in charge of issuing
these mobility subsidy cards in collaboration with the Ministry of Transport, Ministry of Interior, and
Ministry of Petroleum and Mineral Resources.

2.   For car owners (privileged)

In the view of encouraging car owners to move to public transport, car owners could be allowed to
exchange part (or all) of the fuel subsidy provided to them by a fuel subsidy card to a partial mobility
subsidy. This would be used specifically for high quality modes of public transport, such as high-quality
buses and the metro. These high-quality buses (air-conditioning, a clear timetable, and high fares) could
be operated by the private sector in several large cities such as Cairo and Alexandria.

The establishment of the partial mobility subsidy to car owners and coordination with private high-quality
bus owners could be managed by the Greater Cairo Transport Regulatory Authority (GCTRA).

3.   Through the food subsidy

An alternative to creating a mobility subsidy card would be to issue the mobility subsidy as part of the
food subsidy mechanism. However, it is important to ensure that the food subsidy is better targeted and
overcomes its current challenges.

On the other hand, if the fuel subsidy card becomes successful, then the food subsidy can be linked to this
card.