LE 20 billion sewage infrastructure project put on hold
CAIRO: The Ministry of Investment (MOI) and Central Bank (CB) said Sunday the government has begun the second phase of settling public company debt. The entire phase, amounting to LE 9.2 billion, is set to be completed in a few months as proceeds from the October sale of the Bank of Alexandria (BOA) to Italy s Sanpaolo IMI Group are transferred.
Public company debt had reached LE 31.5 billion in June, 2004, of which LE 28.5 billion were owed to public banks. In preparation to sell BOA, the government paid LE 6.9 billion to settle the debts of 46 public companies to the bank, in what it called the first phase. MOI s Mahmoud Moheiddin had announced in advance of the bank s sale the sum would be used to settle public company debt and finance the government s LE 20 billion sewage infrastructure modernization project.
The second phase, expected to cover 54 companies, will bring total public company debt to about LE 10 billion, says MOI, though officials declined to disclose the exact figure. The LE 9.2 billion sum is now being allocated to the remaining three public banks: National, Misr and Caire.
MOI has come under strong public criticism for not allocating BOA privatization proceeds to infrastructure projects in health, housing and transportation as was done with the LE 16.7 billion sale of the third mobile operator license. Addressing the concern, Moheiddin said paying off public company debt is vital to the restructuring of those companies and financial system reform overall.
Speaking to The Daily Star Egypt, a senior MOI official defended Moheiddin, but declined to be identified.
When you lift the debt burden off of a company, you give it more room to breathe, the official said. A lot of the companies that have had their loans repaid are now recording positive bottom lines because interest alone was putting them in the red year after year.
Regarding not allocating money to the sewage program direly needed in many of the villages along the Nile, the Ministry of Finance said the government has decided to use proceeds from the future sales of public companies now under restructuring.
In the meantime, the MOI official says more than 152,000 workers will benefit from the restructuring of their companies as all public companies are required by law to give their workers annual profit shares. The 54 beneficiary companies stand to save LE 1.2 billion in interest in the first year as a result of having their debts paid off.
Settling these companies debts is a huge part of the restructuring program, whether or not they are put up for sale, he says. The sum now being paid off to public banks, combined with the steady installments paid by some companies, is expected to bring public company debt down to about LE 10 billion, of which LE 7.8 billion are owed to public banks.
