Banks fear non-payment, interest rate at 14%

Egypt's government fails to obtain treasury bills

GMT 16:01 2013 Tuesday ,01 January

Arab Today, arab today Egypt's government fails to obtain treasury bills

Egyptian banks are 'taking advantage' of the economic mess
Cairo - Mohammed Salah

Egyptian banks are 'taking advantage' of the economic mess The Egyptian government has failed to obtain targeted loans from the local banks, known as the treasury bills, in the last three months. Figures shows that the final total of loans sits at 155 billion Egyptian pounds , with the target being 170 billion Egyptian pounds. As a result, the government's inability to face the economic problems along with fears that the it will not be able to repay bank loans, has led to an increase in the interest rate on government debt instruments to 14 percent.
In addition, the government has not paid back what it borrowed from banks over the last few years, using it to meet the budget deficit by providing strategic goods and paying salaries of public sector employees. The value of domestic debt during December reached one trillion and 238 billion Egyptian pounds.
The Chairwoman of the Board of Directors at al-Mashoura financial services, Basant Fahmi said: "The current events have a very bad impact on the economy, which is undergoing a critical and highly dangerous condition. There is no stable economy in the absence of political stability, as the current situation discourages new investments."
Fahmi also said that foreign investors are reluctant to enter the Egyptian market, "fearing for their money, under the existing circumstances and conditions."
Fahmi explained that public banks excessively granted investments in the government's treasury bills, which made the banking system suffer as a result of the inability of the government to pay its debts. "Under the current budget deficit, the government will not be able to pay wages for roughly 6 million employees in the public sector, which will increase prices of commodities and other currencies, against the pound, as well lead to a higher rate of inflation."
Fahmi added that banks are trying to seize the opportunity, in light of the needs of the government to borrow from banks, and resort to raise the interest rate on government’s debt instruments, which "exceeded the barrier of 14 percent."Meanwhile, government sources have said that banks are concerned by rumours of bankruptcy and the critical economic situation as a result of their refusal to finance the government. This has led to the cancellation of tenders for treasury bills during the past few days reducing the bank's investment portfolios in loans to the government, and raising interest rates to an unprecedented record level.

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بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
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