The government is pressing ahead with efforts to reorganise the financial positions of public economic authorities and companies by tackling financial entanglements accumulated over decades.
The move follows the signing by the National Investment Bank of two framework agreements to settle debts worth approximately LE196 billion.
The settlements aim to address financial accumulations dating back to the 1980s in some cases and to restore balance to the financial positions of the government authorities and state-owned companies.
Officials hope this will ease the pressure on the state budget while enabling these entities to access financing and move forward with development and expansion plans.
Financial entanglements refer to the complex network of mutual debts and receivables between economic authorities, ministries, public companies and state-owned banks. These have accumulated over many years as service and development projects were financed without generating sufficient economic returns, while loan repayments and interest obligations were repeatedly deferred.
The problem was compounded by unpaid government subsidies and the absence of regular financial settlements among state institutions.
Over time, the entanglements created substantial liabilities on the balance sheets of many government entities, limiting their ability to borrow, attract investment, or carry out financial and administrative reforms.
Under the first agreement, debts owed to the National Investment Bank by companies affiliated with the Holding Company for Drinking Water and Wastewater will be settled. These liabilities amounted to LE62.2 billion at the end of December 2025.
The second agreement covers the settlement of debts owed by the General Authority for Reconstruction Projects and Agricultural Development amounting to LE133.5 billion, in addition to approximately LE306 million owed by the Egyptian Agricultural Authority.
Together, the two agreements bring the total value of the settlements to nearly LE196 billion, making the operation one of the largest exercises in financial disentanglement undertaken by the government in recent years.
Yehia Abu Taleb, a professor of public finance at Ain Shams University in Cairo, said the importance of the settlements lies in restructuring the financial positions of government institutions and public companies.
For years, old debts appeared as assets due to the National Investment Bank while simultaneously representing heavy liabilities on the books of debtor institutions.
According to Abu Taleb, the settlements will help clean up financial statements and provide a more accurate picture of the real financial position of these entities, improving financial solvency indicators and enabling more efficient resource management.
He added that maintaining large historical debts that are effectively uncollectable inflates accounting figures and complicates financing operations while increasing reliance on government support. Settlements, he argued, make it possible to reorganise obligations in a more realistic and transparent manner.
The move could also create opportunities for government entities to secure new financing, enter investment partnerships, and implement restructuring and development programmes once they are relieved of accumulated financial burdens.
Although the detailed implementation mechanism for the latest settlements has not yet been announced, previous experience suggests that it generally relies on several tools.
These may include offsetting mutual debts and receivables, transferring assets or land owned by debtor institutions, converting part of the debt into equity or financial contributions, or having the state treasury absorb part of the liabilities through internal public sector arrangements.
As a result, the announced settlement figures should not necessarily be interpreted as an equivalent cash injection. Rather, they may involve a combination of accounting and financial arrangements.
This is not the first time Egypt has undertaken a broad financial disentanglement programme. Between 2009 and 2010, one of the country’s largest settlement operations took place during the tenure of then investment minister Mahmoud Mohieldin.
That process involved settling mutual debts among public business sector companies, state-owned banks, and the National Investment Bank worth approximately LE32 billion at the time. It relied on transferring assets, land, and companies, writing off part of the debt and revaluing government assets to reduce financial pressures on public enterprises and support restructuring efforts.
Although the settlement received a positive reception initially, it later prompted questions regarding how the transferred assets had been valued, whether the expected economic returns had materialised, and the absence of a comprehensive assessment of the impact on beneficiary companies.
There were also concerns about the transfer of the ownership of strategic assets in exchange for settling historical debts and whether such transfers improved long-term management efficiency.
Hassan Awadah, a professor of government finance at the German University in Egypt, argued that the success of the current settlement should not be measured solely by the size of the announced figures but by its ability to permanently resolve financial entanglements and prevent them from re-emerging.
He said that this would require a fair and transparent valuation of the assets used in the settlements, stronger financial management within the institutions involved, and linking the settlements to clear reform and operational plans that prevent debt accumulation in the future.
Several issues remain to be monitored in the coming period, including how the settlements will be implemented, the nature of the assets involved, their impact on the National Investment Bank’s financial position, and their implications for the state budget, Awadeh said.
He added that the latest settlements reflect a growing government effort to address accumulated financial distortions within the administrative apparatus and economic authorities in support of fiscal reform and more efficient public asset management.
The main challenge, however, lies in transforming the settlements from a purely accounting exercise dealing with historical debts into an effective tool for restructuring public institutions and strengthening their ability to achieve financial and developmental sustainability in the years ahead.
The National Investment Bank has played a central role in Egypt’s development model since its establishment under Law 119/1980 as the state’s financing arm for projects included in the national development plan.
* A version of this article appears in print in the 2 July, 2026 edition of Al-Ahram Weekly
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