Cablegate: Unprofitable State-Owned Enterprises Swap Land for Debts


DE RUEHEG #0121/01 0241343
R 241343Z JAN 10



E.O. 12958: N/A

REF: 07 CAIRO 829

1.(SBU) Key Points: -- State-owned Enterprises (SOEs) are handing over real estate to settle a significant amount of their outstanding loans to public sector banks. -- The land for debt swaps will settle about 80% of the SOEs outstanding loans with the public banks. -- This process will allow the GOE to continue its bank reforms without spending more money. ------------------ Land for Debt Swap ------------------

2.(SBU) The Ministry of Investment, which oversees most State-owned Enterprises (SOEs), is having 152 SOEs hand over some of their real-estate to National Bank of Egypt (NBE) and Banque Misr to settle a significant amount of their outstanding debts. NBE and Banque Misr publicly announced on 4 January that they were accepting the land in exchange for debt. NBE and Banque Misr are public sector commercial banks and are Egypt's two largest banks. Mohamed Saleh, head of the Capital Markets Unit at the Ministry of Investment, told us on 13 January that the NBE and Banque Misr will be able to sell the land easily because they have experience selling land that was given to them during previous GOE reforms of SOEs and the banking sector.

3.(SBU) Saleh told us on 13 January that this land for debt swap will settle about 80% of the SOE's remaining LE 8.1 billion ($1.5 billion) debts to public commercial banks. It is not clear if the land is worth $1.2 billion or if the NBE and Bank Misr are writing down some of the SOE debt as part of the deal. --------------------------------------------- -- Reducing SOE Debt Part of Banking Sector Reform --------------------------------------------- --

4.(SBU) The land for debt swaps follows two rounds of the GOE paying off outstanding SOE loans to banks in 2006 and 2007 as part of the GOE's ongoing banking reforms (reftel). The GOE reduced outstanding SOE debt to public and private banks from LE 31.5 billion ($5.4 billion) in June 2004 to LE 8 billion ($1.5 billion) now.

5.(SBU) These non-performing loans (NPLs) are decades old, according to Hisham Okasha, the Deputy Chairman of the National Bank of Egypt (NBE). He told us on 18 January that the SOEs involved in the swap were unprofitable when they were created under President Nasser in the 1950s and 1960s and even though they are more efficient now, they will never be profitable enough to pay back their outstanding loans. ------- Comment -------

6.(SBU) Settling a significant portion of SOE outstanding debt to public banks will improve public commercial banks' balance sheets, a goal of the GOE's ongoing financial sector reform program. By having the SOEs exchange land for their debts, the GOE is continuing this line of reforms without having to increase government spending and further drive up its budget deficit. The budget deficit is already expected to rise to from 6.9% of GDP in FY2009 and FY2008 to 8.5% of GDP in FY2010. SCOBEY

© Scoop Media

World Headlines


Euro-Med Monitor: Updated Report On The Israeli Massacres During The Military Attack On The Gaza Strip

Geneva – The Israeli forces has killed and maimed many Palestinians in deliberate targeting of unprotected homes with families inside in inhumane military operations, Euro-Mediterranean Human Rights Monitor said. Since the beginning of the current ... More>>

IPPPR: The Independent Panel Calls For Urgent Reform Of Pandemic Prevention And Response Systems

Expert independent panel calls for urgent reform of pandemic prevention and response systems The Independent Panel for Pandemic Preparedness and Response is today calling on the global community to end the COVID-19 pandemic and adopt a series of bold and ... More>>

NGO Coalition On Human Rights: Call For A Stop To Police Brutality In Fiji

A viral video has circulated online showing two police officers utilising disproportionate and excessive force in detaining the suspect, an individual half their size. In the video it shows the man’s head being pressed down on the ground, his arms being ... More>>

Focus On: UN SDGs

ILO Voices: A Future With Hope, Free From Bonded Labour

By Padma Kumari Tamata Formerly in bonded labour, Padma Kumari Tamata is now a farmer, and grows and sells her own vegetables in the Kanchanpur district of Nepal. My name is Padma and I come from Vashi, a small hamlet in Nepal’s far-west Kanchanpur district. ... More>>

UN: Economic Recovery Under Threat Amid Surging COVID Cases And Lagging Vaccination In Poorer Countries

New York, 11 May — While the global growth outlook has improved, led by robust rebound in China and the United States, surging COVID-19 infections and inadequate vaccination progress in many countries threaten a broad-based recovery of the world ... More>>

Study: Cut Methane Emissions To Avert Global Temperature Rise

6 May 2021 Methane emissions caused by human activity can be reduced by up to 45 per cent this decade, thus helping to keep global temperature rise to 1.5 degrees Celsius in line with the Paris Agreement on climate change, according to a UN-backed ... More>>