Egypt’s finance ministry has approved the repayment of LE20 billion ($2.8 billion), the remainder of the treasury's debt to two Egyptian insurance funds – one for public employees and the other for those working in the private sector, the ministry announced on Thursday.
The repayment will be in form of three bonds over a three-year period with an interest rate of 9 percent. The first bond will be issued in January 2015, the ministry's statement added.
The state’s finance ministry owes LE162 billion ($23.2 billion) to the ministry of social solidarity, which operates the private and public pension funds, according to Omar Hassan, head of the public pension and insurance fund.
Hassan told Ahram Online that LE142 billion ($20.3 billion) of the debts was already agreed upon in 2011, to be issued through 10 governmental bonds over 10 years with a yield of 9 percent.
“So, the recent plan is separate from 2011’s deal, which is ongoing,” he said.
From 2006 to 2013, the total governmental bonds – issued by the finance ministry to repay into the public and private pension and insurance funds – were worth LE235.7 billion ($33.8 billion), with interest rates ranging between 8 and 9 percent, Hassan said.
“The total annual yields on the governmental bonds are worth LE19 billion ($2.7 billion) and this amount is paid monthly to the funds through premiums to be able to pay pensioners their dues,” he added.
The money of public and private pensions and insurance funds, which are private by law, have burdened the public coffers since the government established the National Investment Bank (NIB) – a state bank managing public investments – in order to meet its financial commitments in the 1980s.
NIB regulations at the time stipulated that the funds would be deposited in the bank, under the control of the ministry of planning, while the government, represented by the finance ministry, was able to borrow pensioners' cash from the bank at a 4.5 percent interest rate.
In 2005, after the ministry of social insurance was dissolved, the funds were placed under the finance ministry, which was run at the time by Youssef Boutros Ghali.