Minister of Finance Dr. Youssef Boutros Ghali has seen it fit to answer to alleged reports over misrepresentation of revenues from privatization in the state budget.  Over the past few days, a number of parliamentarians have raised queries over privatization revenues to which the Minister of Finance has this to say.

Dr. Ghali has explained that collections for the fiscal year 1996/1997 have been used for three major purposes:

1.  Funding the state budget resources to reduce the deficit and the government debt, the latter being mainly due to the financing of investments of bad performing companies with state loans which have not yet been paid.

2.   Partial payment of public sector company debts to banks and for the technical reform of bad performing companies.

3.  Using part of the collection to pay for early retirement in privatized companies.

Dr. Ghali added that returns from privatization since the fiscal year 96/97 have soared to 35.7 billion pounds of which 11.5 billion pounds have been paid to the buyers who are the  banks or joint companies on whose behalf the public sector companies have been sold, yielding a  return of 24.2 billion pounds.

Dr. Ghali further explained that the LE 24.2 billion pounds have been re-allocated as follows:

  14.4 billion pounds have been allocated to the state’s public resources to finance a portion of its expenses instead of augmenting the deficit and refinancing the void through loans.

   5.3 billion pounds due to banks on behalf of companies undertaking the privatization of bad performing companies.

  3.9 billion pounds in costs of early retirement.

 0.6 billion pounds for the technical and administrative reform of companies.

As for the details on 14.4 billion pounds which have been allocated to the state public resources, they have been used to finance state budget expenses from the fiscal year 97/98 to the fiscal year 2005/2006 as follows:

 In l997/98, the amount of 3192 million pounds have been listed  as sale of assets.

 In l998/1999, 898 million pounds have been similarly listed.

  In l999/2000,  1877 million pounds have been listed under sale of assets.

  In 2000/2001, 498 million pounds have been similarly listed.

  In 2001/2002, 418 million pounds have been similarly listed

 In 2002/2003,  39 million  pounds have been similarly listed

  In 2003/2004,  17 million pounds have  been similarly listed

  In 2004/2005, 1015 million pounds have been similarly listed..

In 2005/2006, the state budget has listed  6418 million pounds as representative of the sale of shares of  Egypt Telecommunications and has been listed under revenues from asset sales.  The rest of the amount which is 1341 million pounds has been placed under revenue from privatization.  The amounts when added will equal to 14.372 to represent the income from privatization for the fiscal years 1998/1997- 2005/2006.

Dr. Ghali has explained that the above details have been included in the state budget final accounts and which have been reviewed by the Central Auditing Organization and passed by the People’s Assembly.  Dr. Ghali has also explained that changing the nomenclature to revenues in 2005/6 has been due to the implementation of international listing standards by   the Ministry.   

 Minister Ghali said that privatization which has begun in l996 and is continuing has paved the way for the sale of a number of state owned assets to banks or other  multi parties, becoming thus not necessarily fully owned by the government as represented by the Ministry of Finance.   Dr. Ghali said that in some cases, the companies may be fully state owned or may be owned by other public sectors such as banks in which case the revenue from the sale to the treasury is nil because the owner is a different person.   Accordingly, the sale collection never appears in the budget with the exception of  the government’s share after discounting other liabilities, namely early retirement .  The government share in the treasury usually pays up portions of the government debt..  Dr. Ghali has explained however that as of 2005/6, the total collection from privatization will be listed in the budget and then re-allocated as happened with oil funding in efforts to implement transparency of movement of state resources and simplify auditing of fiscal performance.

Dr. Ghali reiterated that if portion of the asset sales will enter in the state budget it must be pointed out that the government  as capital owner of these companies, has been over burdened with financing the bad performing companies to be able to offer the latter in the market for their subsequent sale.

 (Source: ministry of finance)