The Egyptian government will issue its long-anticipated debut sovereign Sukuk in the second half of the current fiscal year, with executive Sukuk regulations to be released within the next three months, confirmed Finance Minister Dr Mohamed Maait. VINEETA TAN has the story.
In an official statement, the finance ministry revealed that it is working with the Financial Supervisory Authority and Al-Azhar University on the executive regulations of the Sukuk law which are expected to outline the technical and legal requirements for the government Sukuk offering, which could be in either local or foreign currencies. Egypt’s fiscal year begins on the 1st July.
As covered by IFN previously, on the 6th June, the Egyptian parliament gave the green light to the draft law, with approval from the Lower House, and on the 28th June it received final approval from the House of Representatives, getting the nod from President Abdel Fattah al-Sisi in early July.
There are a few conditions — a state company must be established to manage any offerings, whether domestic or international, while the maturity can be anything up to 30 years (in line with the government’s goal of extending its debt instruments into the longer term).
Dr Mohamed has told local media that Egypt’s sovereign Sukuk debut will be between US$1 billion to US$2 billion, and that it will be backed by assets privately owned by the state, with the prime minister to decide which state fixed and movable assets are to be defined as ‘private property’.
Once the executive regulations are approved by the cabinet, an oversight committee comprising economics, finance and legal experts as well as Shariah scholars will be formed to oversee the Sukuk offering process. The offering will be managed and brought to market by a state-owned company, which will be established for this sole purpose.
A Sukuk sale from the Egyptian government has been a long time coming, as proceeds could attract a new pool of investors and help it narrow a widening budget deficit, particularly during a global pandemic. Yet, while the government has yet to make its debut, local corporates have already turned to the Sukuk market to raise capital.
This includes Contact Financial Holding which issued its sophomore Sukuk through Sarwa Sukuk Company in July. Abu Dhabi Islamic Bank-Egypt also formed its own Sukuk company with the intention of raising at least EGP1 billion (US$63.7 million) this year, while at least five other corporates are reportedly considering tapping the Islamic debt capital market.