Egyptian government dues owed to pharma firms hit EGP 50 bn

Government arrears owed to Egypt’s pharma companies have climbed to EGP 50 bn, Federation of Egyptian Chambers of Commerce’s pharma division head Ali Auf told EnterpriseAM. Despite the mounting debts, firms continue to supply meds under existing agreements with the Unified Procurement Authority to keep hospitals stocked, Auf added.

But the government is keen to let the industry know that it will make good on its debts, with an announcement last week that it has allocated a total of EGP 10 bn to settle a significant portion of debts owed to pharma and medical supplies companies, to be paid over a three-week period. Prime Minister Mostafa Madbouly also reaffirmed the government’s efforts to fully settle its dues owed to pharma firms.

While the government’s commitment to pay a portion of outstanding dues offers firms some relief, Auf emphasized the need for additional support to address liquidity issues and sustain production. He noted that while the sector has been included in the government’s low-interest financing initiative, which offers loans at a 15% interest rate for manufacturers, firms have yet to receive the soft loans carrying interest rates of 5-7% that they were told would be coming in order to help them recover to pre-FX crisis production levels.

A new distribution initiative is also hoping to bring liquidity into the sector and avoid similar crises in the future, with 1.5k licensed pharma warehouses expected to receive a larger share of locally produced meds in exchange for immediate payment of manufacturers. These distributors, which currently collectively hold around EGP 70-80 bn in liquidity, according to Auf, are expected to play a pivotal role in easing the cash crunch across the sector by assuring that a greater portion of meds purchases are paid for up front rather than in arrears.

Meds price hikes are set to continue, with the sector to hike the prices of around 100 meds per month. Auf added the increases will be incremental and targeted, with more modest adjustments for chronic illness meds and larger hikes for non-chronic meds.