13,000 borrowers owed LE 1.5 billion to public banks at the end of 2006 CAIRO: Central Bank Governor Farouk El Okdah announced Monday the launch of a program to settle the non-performing loans of 13,000 borrowers amounting to LE 1.5 billion by June, 2007. According to the plan, borrowers with less than LE 500,000 in outstanding debt to public banks will be given a chance to settle their accounts in return for payment of 25 percent of the amount owed. All debts up to LE 1 million can be settled in return for 30 percent,provided payments in both cases are made by the end of June, 2007. El Okdah said the program is designed to lift the burden off of small and medium businesses and pump life back into the local economy. Studies have shown settling the non-performing loans of small borrowers allows them to generate economic activity, lower unemployment and accelerate growth. At the end of 2006, public banks had undertaken legal action against 10,000 borrowers for failing to make payments. More than 2,500 court rulings have been issued in favor of the banks but have not been implemented, while 114 borrowers are now serving prison sentences for failure to repay their loans. El Okdah said the program is part of the loan-settlement program approved by President Hosni Mubarak. In 2006, the program focused on settling loans exceeding LE 50 million, including public company debt. The government plans on settling the non-performing loans of public companies to state-owned banks by the end of 2007 using privatizationproceeds, he added. At the completion of the ongoing second phase of settlement, worth LE 9.2 billion being financed using the sale value of the Bank of Alexandria (BoA), the government will have paid off LE 16.1 billion of LE 26 billion owed to public banks. Another LE 4 billion are owed to private banks, which Minister of Investment Mahmoud Moheiddin says areplanned for settlement by mid-2008. 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 last year, 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. Reducing the debt of companies to LE 10 billion will save the government more than LE 1 billion in annual interest payments, Moheiddin said, and benefits more than 152,000 workers as all public companies are required by law to give their workers annual profit shares. El Okdah did not comment on the annual inflation rate, last reported at 12.4 percent in January. The Monetary Policy Committee, headed by El Okdah, will meet on March 22 to discuss its interest rate policy in light of the February figure to be reported.
