Cash-strapped Egypt plans to introduce ration cards for subsidized fuel in its next fiscal year, which begins July 1, the country's oil minister said in an interview with Al Arabiya Television.

The government has previously said it aims to allocate a fixed amount of subsidized diesel or gasoline to each driver and any purchases that exceed the quota will be sold at market prices.

"Our plan is to remove subsidies on fuel gradually in 3-5 years... but we cannot give an exact date yet on when the cards will be introduced as we don't want people to hoard fuel to sell it later on the black market," Osama Kamal told the Dubai-based channel.

The new system will curb the smuggling phenomenon, which eats up to 20% of the subsidized fuel on the market, Mr. Kamal said.

Many Egyptians have already been using ration cards for decades to buy rice, cooking oil, sugar, tea and pasta.

By the end of the current fiscal year, the amount allocated for energy subsidies will surge to more than 120 billion Egyptian pounds ($17.5 billion) from the initially budgeted EGP70B due higher consumption and a sharp fall of the pound, Mr. Kamal said.

"If no measures are taken, in the next fiscal year the amount will rise to about EGP135 billion and if some measures are taken the figure will drop to EGP100 billion," he said.

A shortage of state-subsided diesel has already paralysed transportation in many parts of the country, which government and industry officials have blamed on the worsening state of the country's public finances, black market trade, lower fuel production and an inefficient subsidy system. Two key energy officials were dismissed last month after bus and truck drivers blocked major roads to protest a scarcity of diesel.

Continuing unrest in the country since the ousting of former president Hosni Mubarak has led to a risky economic mix of dwindling foreign-exchange reserves, declining tourism revenue and costly price subsidies, economists say. To prop up the Egyptian currency, the central bank has gone through nearly two-thirds of its foreign-currency reserves, pushing the country to the brink of a liquidity crisis.

Egypt is in the throes of trying to secure a $4.8 billion loan from the International Monetary Fund, a move viewed as critical to rescuing its economy and mending its reputation as a place to do business.

The IMF wants to see Egypt reduce its subsidy spending, as part of a reform plan for the loan, say those close to the talks. But any subsidy changes will likely only enrage further the legions of poor who rely daily on cheap fuel, making the already uncomfortable summer months all that more unbearable.

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