By Evline Meshreky
The finance ministry has issued two new bonds for public and private social insurance funds at a tax-exempt interest rate of 9% at a total value of EGP 14.2bn, Minister Hany Kadry Dimian announced in a Wednesday statement.
This represents the value of the third tranche of the debt settlement agreement between the public treasury and social insurance.
“This step comes as a correction to what the Ministry of Finance did wrong before the 25 January 2011 revolution,” said economic expert Doha Abdel Hamid.
Abdel Hamid explained that before the revolution the insurance funds were added to the general budget to decrease the deficit. This, he said, was the wrong decision, as the insurance funds “belong to the people and not the government”.
The finance minister said that the total bonds that have been issued after the 25 January Revolution for the social insurance fund amounted to EGP 42.6bn for which the public treasury bears interest rate of 9% monthly. This allows funds the liquidity needed to meet its obligations to pensioners and their beneficiaries.
He pointed out that the Ministry of Finance will issue two bonds in January 2015 for the social insurance funds for EGP 6.5bn. This comes due to a settlement agreement to increase the indebtedness of insurance funds during the last two years for the settlement agreement, which first identified the debt worth EGP 142bn.
Dimian said that to prevent repeating the emergence of new differences, it has been agreed to include in the general budget starting from the current fiscal year the full amount of dues of the public treasury to the social insurance funds. EGP 33.2bn have been assigned to the social insurance funds, which is 13.7% higher than the previous fiscal year.
The minister stressed the commitment of the Ministry of Finance to guaranteeing the social insurance funds whether invested in governmental debt instruments or invested by the National Organization for Social Insurance. The constitution states clearly the commitment of the public treasury to pay any deficit or lack of the insurance funds.
He added that the ministry is keen on implementing all the agreements that have been reached with the Ministry of Social Solidarity to settle the debts of the public treasury and resolve the financial entanglements between the public treasury, represented by the Ministry of Finance, and the social insurance funds and the National Investment Bank.