Liability Asset Management Corporation (LAMC) which was formed to manage the consolidation and servicing of a portion of the country’s state-owned enterprises (SOE) debt, has serviced a total of 27.3 billion birr for the loan taken by two pubic enterprises.
Habtamu Hailemichael, Director General of Public Enterprises Holding and Administration (PEHA), stated in the first half of the budget year that LAMC has settled the arrears owed by Ethiopian Sugar Corporation and Chemical Industry Corporation to the creditor and state-owned financial giant, Commercial Bank of Ethiopia (CBE).
The asset management corporation that was formed early last year, was set up to ensure that SOEs, do not continue to amass unsustainable debt with no expectation of future bailouts.
LAMC has soaked up and administered the debt of selected highly indebted public enterprises like the two, Sugar and Chemical Industry corps.
As per its mission, in the first half of the current budget year, LAMC has settled 13.98 billion birr for the Sugar Corp and 13.3 billion birr for the Chemical Industry Corp.
Looking back, in the past, the sugar corporation received billions of birr in loans from local and external sources for the new sugar mill projects that are being constructed in different parts of the country. However, the project accomplishment has been significantly lagging which places the corporation in a hot seat in terms of loan repayment.
Similarly, the current settlement for Chemical Corp is related to the project that has seen a high delay in a fertilizer complex that is yet to start operation.
PEHA said that the debt settlement that LAMC has settled on behalf of Chemical Corp is related to Yayu Multi-Complex Industries project.
PEHA’s Director-General on the other hand said that in the first half of the budget year public enterprises have settled the debt for external loans as per their plan.
“External debt of USD 54.7 million for Sugar and Chemical corporations has been settled as per the projection,” he said.
The comprehensive SOE reform agenda which is carried out by the government has targeted SOEs to run to a healthier asset and liability position.
On the asset side, the primary source of finance for the LAMC, which was formed as a business entity with a capital of 570 billion birr, will be the privatization proceeds and SOEs’ dividends. Recently, the Ministry of Finance (MoF), which is the regulatory body of LAMC, stated that the telecommunication sector transactions and the privatization of the Sugar Corp will generate proceeds to finance the LAMC’s liabilities in the short term.
Capital’s secured information from relevant sources indicated that the government is finalizing to hire consultants for the privatization of sugar millers to which five of them are established as an independent legal industry by the latest Council of Ministers’ regulation. The council has also approved a regulation to form the Ethiopian Sugar Industry Group that may reform the current corp.
LAMC will also engage in additional revenue-generating activities.
“For instance, it can invest the privatization proceeds and underutilized public assets to generate additional revenue. This approach will ensure that debt service on the SOE stays on track without burdening the central government’s annual budget,” MoF recently stated.
Ethiopian Electric Power, Ethiopian Electric Utility, Ethiopian Railway Corporation, Ethio-Engineering Group, Chemical Industry Corporation, Construction Works Corporation, and the Sugar Corp are at high risk of debt distress.
PEHA administers 36 public enterprises, while 15 of them are included recently to be regulated under the administration.