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Wednesday, 22 July 2020

Egypt’s maiden sukuk + green bond sales are in the pipeline as gov’t eyes return to debt diversification strategy

Egypt’s maiden state sukuk + green bond sales are in the pipeline as gov’t eyes return to debt diversification strategy: The government is currently “in an advanced stage” of a USD 500 mn green bond offering in what would be Egypt’s maiden sovereign sale of the debt instrument, head of the debt management unit at the Finance Ministry Mohamed Hegazy tells Bloomberg. The ministry had tapped four banks earlier this year to manage and market the bond sale, which has been in the works for several months: Credit Agricole, Citibank, Deutsche Bank, and HSBC. Credit Agricole and HSBC were also hired as “structural advisors.” The issuance was originally slated for FY2019-2020 as the Egyptian treasury planted a flag amid its effort to diversify its sources of funding.

Also on the menu is Egypt’s first-ever issuance of sharia-compliant sukuk, Hegazy tells the business information service. The government is “waiting on final approvals” to begin selling the Islamic bonds, he said, without providing further information on when we can expect to see an issuance going to market. The government is also considering selling as much as EUR 7 bn-worth of USD- or EUR-denominated eurobonds during the current fiscal year, Hegazy said. Egypt closed a record USD 5 bn eurobond sale in May in what was the country’s largest-ever international issuance.

The diversification in debt instruments comes as the government is looking to get its comprehensive debt strategy back on track. The strategy, which the Finance Ministry began implementing in March 2019, relies largely on diversifying its debt instruments and borrowing currencies to widen its investor base and shifting towards longer-term debt. Egypt resorted to borrowing from the IMF and other international lenders to plug its financing deficit, which some analysts suggest has made it among the emerging markets that are most vulnerable to sovereign debt default in the next year.

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