Cancellation of Certain Agricultura
Cancellation of Certain Agricultural Debts
In the middle of last month, the President of the Republic, Dr. Mohamed Morsi, issued Presidential Decree No. 123 of 2012 (published in the Official Journal, Issue No. 33 (bis, A), on August 16th, 2012) cancelling certain debts owned by farmers to the Bank for Agricultural Development and Credit (“the Bank”).
The conditions for eligibility are the follows:
1) That the debt is classified as “below standard” or less at the close of the fiscal year ending on June 30th, 2012,
2) That the original debt (excluding interest) is less than then thousand Egyptian Pounds,
3) That the Public Treasury bears the cost of cancelling the debt over two fiscal years ending on June 30th, 2014,
4) That the Bank bears the book value of the interest on the debts, and
5) That with respect of residents of the Sinai Peninsula, it would seem that the Decree cancels all debts irrespective of their values, i.e. notwithstanding that they are below the ten thousand Pound threshold.
The Decree further states that the cost borne by the Public Treasury as a result of the debt cancellation is One Hundred and Seven Million Pounds, the book value borne by the Bank is Twenty Eight Million Pounds, the cost of debt cancellation for debts owed by residents of Sinai around One Hundred and Nineteen Million Pounds, and the book value for the Bank around Forty Six Million Pounds.
Comment
In spite of the fact that the Decree attempts to lift some injustice and burden from the small farmers who suffer from excessive costs and little return, it is – from a legal and legislative perspective – a source of some concern and reservation. The determination of a maximum amount for the debt that is eligible for cancellation is totally arbitrary and it implicitly punishes those with larger debts as well as those who may have been made payments regularly. This is a bad legislative policy because it encourages non-payment in the future. A better policy would have been to forgive all debts from certain payments or from certain interest burden, irrespective of their values, and to give some benefit to those who repay regularly. The purpose of the Decree may be a good one, but its application leads to further injustice.
In the middle of last month, the President of the Republic, Dr. Mohamed Morsi, issued Presidential Decree No. 123 of 2012 (published in the Official Journal, Issue No. 33 (bis, A), on August 16th, 2012) cancelling certain debts owned by farmers to the Bank for Agricultural Development and Credit (“the Bank”).
The conditions for eligibility are the follows:
1) That the debt is classified as “below standard” or less at the close of the fiscal year ending on June 30th, 2012,
2) That the original debt (excluding interest) is less than then thousand Egyptian Pounds,
3) That the Public Treasury bears the cost of cancelling the debt over two fiscal years ending on June 30th, 2014,
4) That the Bank bears the book value of the interest on the debts, and
5) That with respect of residents of the Sinai Peninsula, it would seem that the Decree cancels all debts irrespective of their values, i.e. notwithstanding that they are below the ten thousand Pound threshold.
The Decree further states that the cost borne by the Public Treasury as a result of the debt cancellation is One Hundred and Seven Million Pounds, the book value borne by the Bank is Twenty Eight Million Pounds, the cost of debt cancellation for debts owed by residents of Sinai around One Hundred and Nineteen Million Pounds, and the book value for the Bank around Forty Six Million Pounds.
Comment
In spite of the fact that the Decree attempts to lift some injustice and burden from the small farmers who suffer from excessive costs and little return, it is – from a legal and legislative perspective – a source of some concern and reservation. The determination of a maximum amount for the debt that is eligible for cancellation is totally arbitrary and it implicitly punishes those with larger debts as well as those who may have been made payments regularly. This is a bad legislative policy because it encourages non-payment in the future. A better policy would have been to forgive all debts from certain payments or from certain interest burden, irrespective of their values, and to give some benefit to those who repay regularly. The purpose of the Decree may be a good one, but its application leads to further injustice.