CAIRO: The Egyptian government will use $1 billion in loans from the World Bank and the African Development Bank to raise the capital of the country s two biggest state banks, National Bank of Egypt and Banque Misr, a statement said on Wednesday.
The World Bank is lending $500 million and the African Development Bank the same amount, said the statement from the office of Investment Minister Mahmoud Mohieldin.
National Bank of Egypt, the country s largest commercial bank, has paid-up capital of LE 2.25 billion Egyptian pounds and that of Banque Misr was LE1.8 billion in mid-2005, according to their Web sites.
Banque Misr is in the process of merging with state-owned Banque du Caire to create an entity which could challenge the dominance of National Bank of Egypt.
The Egyptian government sold 80 percent of the fourth largest state bank, Bank of Alexandria, to Italy s Sanpaolo IMI last year for $1.6 billion.
The statement said that raising the capital of the two banks by selling shares to the public would have violated the government s policy of keeping the two banks in state ownership.
The government also rejected a proposal that it transfer money from the central bank s foreign reserves to raise the banks capital, arguing that the purpose of the reserves was to protect the Egyptian pound, it added.
The African Development Bank loan must be repaid over 20 years with a six-year grace period and the World Bank loan is over eight years, it said. It did not mention interest rates.
Mohieldin defended the loans in parliament on Tuesday evening, saying Egypt s foreign debt fell to $28.9 billion or 25 percent of gross domestic product, in the July-September 2006 period, from $29.4 billion or 43 percent of GDP in 2002/3.
But on Wednesday parliament, which needs to approve the loans, delayed a vote on them after some members called for a rollcall vote in view of the size of the loans, the state news agency Mena reported.
