Will the return of high-profile loan defaulters help banks balance their books, asks Gamal Essam El-Din The trial of businesswoman , dubbed the "Iron Lady" by the press, is scheduled to begin after Eid Al-Fitr. Abdel-Moneim, who has been on the run for 22 years, was arrested on 28 August at Cairo International Airport following her surprise return from Athens. Judicial authorities ordered that she should remain in custody in Qanatir Khairiya prison, north of Cairo, pending her retrial. Abdel-Moneim, who is charged with embezzling up to LE600 million in loans from five Egyptians banks, will stand trial before North Cairo's Criminal Court, with proceedings opening on 26 September. She has been sentenced in absentia on several occasions, the last in 2004 when the Cairo Criminal Court found her guilty of forging a letter of guarantee to obtain a loan of $2.5 million in 1986. Abdel-Moneim also faces a separate trial on charges relating to her signing a large number of cheques without having the funds to cover them. Abdel-Moneim, who fled Egypt in 1987, insists she is not guilty, claiming to have repaid all outstanding debts. Her creditors, which include Banque du Caire, the National Bank of Egypt, the Suez Canal Bank, Bank Misr and United Bank, say they are reopening their files not just on Abdel-Moneim but on other high-profile defaulters who fled Egypt leaving billions of pounds of unpaid loans. Paula Hafez, head of Bank Misr's legal department, says work is already underway to review Abdel-Moneim's outstanding debts. "The credit facilities she obtained from Bank Misr were secured a long time ago and must be reviewed and followed-up," says Hafez. "Abdel-Moneim might have already repaid most of her debts to us or she could still owe the bank significant sums in unpaid interest." Abdel-Moneim insists that she has returned to Egypt to prove that she is innocent. Her return has led to a flurry of speculation that the government has adopted a new policy towards the so-called loan defaulters. Ahmed Qora, the former chairman of a public-private sector bank, believes that the government of Prime Minister Ahmed Nazif has come to the conclusion that "business fugitives should be offered the opportunity to return to Egypt and settle their debts without fear of facing years in jail". Between 1998 and 2003 Egypt was suffering a severe economic slowdown, says Qora. The situation was exacerbated when the then prime minister, Atef Ebeid, floated the Egyptian pound and liberalised exchange rates. "The move meant that the cost of servicing existing loans increased dramatically while the economic slowdown resulted in a shrinking of profits. Businessmen were hit hard," Qora argues. He also criticises the management of Banque du Caire, which is overburdened with non-performing loans. "The management of the bank decided to take a tough line with businessmen, insisting that they repay their debts immediately, in cash, or else face legal action." Much worse, says Qora, was the decision to impose punitive rates of interest on loans which saw businessmen's liabilities balloon to a point where they could not hope to repay their debts. In 2007 the government sacked Banque du Caire's chairman, Ahmed El-Bardai, and merged the bank with the public sector giant Bank Misr as a first step towards privatisation. "The privatisation failed precisely because Banque du Caire's portfolio is riddled with non-performing loans," says Qora. Mustafa El-Said, a former minister of the economy and current chair of parliament's Economic Affairs Committee, believes the government, in coordination with the banks, has formulated a scheme that will allow business fugitives to repay their debts at a reduced, and sometimes zero, rate of interest. "Many fugitives believe interest rate levels were set too high and left them no other course but to default," says El-Said. "Now the government and banks appear determined to assist fugitives in selling their assets in Egypt or allowing banks to accept assets in partial settlement of outstanding debts." El-Said also believes that some of the businessmen that fled, while in no worse a position than others, were forced to do so because they did not enjoy the protection of the ruling National Democratic Party. Rami Lakah, the 45-year-old tycoon who fled to France in 2003 and who was a close friend of Ghad Party founder Ayman Nour, has been in negotiations with Banque du Caire to determine the exact value of his debts. Lakah insists they do not exceed in total LE400 million while Banque du Caire, together with his other creditors, say the value is closer to LE1.4 billion. Lakah's lawyer Tarek Abdel-Aziz insisted last week that Lakah had already settled outstanding loans owed to 22 banks. "They have agreed that he can pay LE240 million immediately and a further LE350 million in instalments over eight years. In return he will be allowed to come back to Egypt without facing trial or jail," says Abdel-Aziz. Steel magnate Hatem El-Hawari, another high- profile defaulter who fled to London in 1997, told Al-Ahram Weekly this week that he has come a long way towards settling debts owed to Banque du Caire. "I have already repaid LE12.3 billion out of total LE12.7 billion and I am ready to return to Cairo," he said. El-Hawari revealed that he has been negotiating with a government commission, including representatives from the Central Bank of Egypt (CBE) and other banks as well as the prosecution authorities. "I think the government has decided to open a new page with defaulters and this is a very good development," said El-Hawari. Media mogul Ihab Talaat, who fled to London in 2007, also announced last week that he is currently in negotiations to repay LE200 million debts. Amr El-Nasharti, the tycoon who was in partnership with Sainsbury's, the UK based retailer, fled to London in 2003, owing LE350 million. El-Nasharti squarely blames former Ebeid and NDP businessmen for his predicament but says negotiations are underway to forgive a portion of his debts, allowing him to return to Egypt and resume his business activities. Some official estimates have valued non- performing loans at LE240 billion, almost 14 per cent of the total credit extended by Egypt's banking sector.
