Wednesday, May 22, 2024
BusinessCash-strapped state liability firm fails debt payment targets

Cash-strapped state liability firm fails debt payment targets

The Liability and Asset Management Corporation (LAMC) has managed to soak up only a little over six percent of its plan to clear debt of state owned corporations during the fiscal year that ended last June.

From its plan of paying 173.8 billion birr the state enterprises owe to the debtors during the ended fiscal year, LAMC paid only 10.8 billion birr, owing it to the financial constraints it faced, according to Sewagegnehu Chane, director of public financial institutions supervision director at the Public Enterprises Holding and Enterprise (PEHA). PEHA supervises five public financial institutions including LAMC.

The Commercial Bank of Ethiopia (CBE) extended maturity dates of the loan repayments LAMC was supposed to pay to 15 years, in order to reduce the burden from the state liability corporation as it struggles to meet the yearly goals.

As a result of CBE’s generous extension of debt repayment dates, LAMC reduced its plan of the repayment for the current year to 44 billion birr.

Under the auspices of the Ministry of Finance, the Corporation sources its finance to repay the debt of state owned enterprises from the dividends of the profitable state owned enterprises themselves.

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Total value of the outstanding debt of the enterprises that LAMC absorbed reached about half a trillion birr, way above the composed profit of the state run enterprises.

Established in 2021 with a subscribed capital of 570 billion birr, the Corporation is tasked to soak up outstanding debt of the state owned  enterprises. It remained to be the only government entity established with the highest capital, above the Ethiopian Investment Holdings that was established with 100 billion birr.

Mulualem Getahun, Deputy CEO of the Corporation blames the situation Ethiopia is under that his office couldn’t be able to meet the target. “It is a difficult time to pay off the debt, unprecedented in any area,” he said.

He disclosed that Ethio Engineering Group (formerly known as MetEC), the Ethiopian Railways Corporation, Ethiopian Sugar Corporation, and Ethiopian Electric Power, have burdened the Corporation with heavy debt and not performing with profits.

So far, the biggest repayments include that of the Ethiopian Electric Power, which accounts for 8.3 billion birr paid to CBE, and Sugar Corporation’s 1.5 billion paid to the Development Bank of Ethiopia (DBE).

Aside the dividends from the state owned enterprises, revenues from the privatization of state enterprises and economic liberalizations are also its financial resource generating means to pay the debts.

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