Egypt’s Public Bank for Development and Agricultural Credit (PBDAC) plans to restructure debts for insolvent farmers but will not drop them, Atia Salem, the bank’s chairman, told Ahram Online on Thursday.
“Dropping farmers' debts would mean the collapse of the bank and we plan to achieve profitability,” explained Salem.
After pausing all actions against insolvent farmers for a year, the bank will restructure those debts over a three to five year period.
The restructuring might involve dropping administrative expenses and interest but not the principle of the debt, added Salem.
During the 2012/13 financial year, ousted president Mohamed Morsi announced that all farmers' outstanding debts below LE10,000 ($1,666) would be cancelled.
Through this programme the finance ministry was supposed to take on the debts and repay them to the PBDAC on behalf of the insolvent peasants. As a result, the ministry currently owes the bank LE1.6 billion ($230 million).
“I am very optimistic and I believe when we meet with finance ministry officials to discuss the issue of their indebtedness, we will reach a reasonable solution,” said Salem.
The PBDAC debts and losses currently amount to LE4 billion ($575 million), adding to the pressure on the bank.
The bank was established in 1930 with capital of LE1 million ($144,000) to counter the effects of the economic depression and protect Egyptian farmers against usurers. Now, the PBDAC's capital is equivalent to LE1.5 billion ($215 million).