Public sector minister to share vision on state-owned firms IPOs before parliament

Differences between committee members on whether governmental deregulation in or out, says MP

Parliament's economic affairs committee is scheduling a meeting with Minister of the Public Sector Khaled Badawi to share his vision on the development of companies in the public sector as well as the management of companies on the stock market in coming period, according to the committee's representative Medhat Sherif.
Sherif added that public sector companies are tantamount to the mainstay of the Egyptian economy and must be developed within the framework of the economic reform measures implemented by the state over the past period.
"There are a staggering number of loss-making companies requiring restructuring; that's why the economic committee will invite the minister to listen to his view on how to restructure those companies, turning their loss into profit," he revealed.
For his part, deputy minister of finance for fiscal policies, Ahmed Kochouk, stated that the government targets to increase market capitalisation from 20-21% of gross domestic product (GDP) to 50-60% by listing governmental companies on the Egyptian Exchange (EGX).
Kouchouk added that the government will publish a timetable of the governmental initial public offerings (IPOs) for the Egyptian Exchange next week, according to his statement at the American Chamber of Commerce in Egypt (AmCham).
Another MP revealed members of the committee differed over whether the governmental deregulation proposal would be according to the shares currently offered on the market or be aimed at increasing the gross capital of existing companies.
He added that this difference of view arose during the time of former minister of the public sector Ashraf El-Sharkawi, as some members of parliament favoured the governmental deregulation of public sector companies by lifting any governmental sanctions in order to allow the private sector to participate in the management of these assets and eventually increase gross capital.
One view maintains that the aim of offering companies on the EGX is to reduce the budget deficit in the current fiscal year (FY).
The Ministry of Finance aims to cut the deficit of the current fiscal year by 9.5%, compared to 10.9% in FY 2017/2016.
The total deficit in the general budget in the first quarter of the current fiscal year reached about EGP 85.3bn, against 76.8% last fiscal year.
It is expected that the deficit in the state budget for the current fiscal year will reach about EGP 370bn, while the Finance Ministry aims to reduce government public debt by 94% of GDP by the end of June 2019, in line with the targeted deficit cuts and growth rates during the same year.
The other view maintains that offering companies on the EGX aims at increasing the gross capital of companies, and thus expanding the activity of those companies, so as to ensure an increase in revenues.
Egypt has signed an agreement with the International Monetary Fund (IMF) to borrow $12bn over a three-year period, $4bn per year, to bolster its homegrown economic reform programme.
Egypt received the first tranche of the loan over two phases, the first at a value of $2.750bn, while the second tranche, received in July, was $1.25bn.
The MP said that offering state-owned enterprises comes within the framework of the economic reform programme under the IMF's Extended Fund Facility. However, the offering will not be the sole arbiter of ensuring whether a governmental management will be opted in or out.
He concluded that the offerings of small shares mean that the main target is local investors rather than foreign ones, which will stimulate Egyptian investments in the market.