Gov’t turning to sukuk to finance national projects

Egypt has been trying to find new finance sources to fund its mega-projects and have a sufficient stock of greenbacks.

Sovereign bonds or sukuk are one of the tools the government tries to use in achieving this goal.

The sukuk will try to appeal to Sharia (Islamic law) compliant investors.

President Abdel Fattah El Sisi ratified the Sovereign Sukuk Law in mid-August last year, almost two months after the parliament approved the law.

Minister of Finance, Mohamed Maeet, expected the first issue of sovereign sukuk to be out before the end of the current fiscal year in June.

Sukuk are a financial certificate that follows Islamic law.

“Sovereign sukuk are securities issued by the government for a fixed term, not exceeding 30 years,” Ahmed Saeed, a professor of commercial law at the British University in Cairo, said.

He told an Arab news channel that sovereign sukuk are a popular financing tool with great success globally.

He estimated the international sovereign sukuk volume at $2.7 trillion in 2020.

Some 70 countries have adopted such sukuk, mainly the UK, Saudi Arabia and the UAE.

Saeed described sovereign sukuk as a promising opportunity for investors to participate in projects launched by the Egyptian government.

Islamic banking had a volume of LE347 billion in Egypt at the end of June 2020.

Minister Maeet expected this volume to exceed LE500 billion by the end of June 2022.

He said his ministry took significant steps in completing the procedures necessary for the issuance of sukuk.

Sukuk are set to finance various projects in the fields of water desalination, electricity production from renewable energy, and transport, Minister Maeet said.

Last month, Egypt issued LE60 billion ($489.84 million) in yen-denominated bonds.

Called Samurai, the new bonds have a maturity period of five years. They were directed to the Japanese market.

Minister Maeet said entering the Japanese capital market would contribute to raising the efficiency of debt management, diversifying resources and financing tools, and expanding the investor base, taking into account geographical diversity.

The same move, he added, would make the best use of opportunities in global markets.

“Such a step contributes to reducing the cost of financing and implementing development projects, while securing more job opportunities,” the minister said.

“It is a new development in Egyptian-Japanese co-operation,” he added.