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Monday, 28 September 2020

Could we be fast approaching our maiden green bond issuance?

Egypt will soon go to market with its first maiden sovereign green bond, Finance Minister Mohamed Maait said yesterday, saying the ministry was “preparing to launch” the offering. Maait stopped short of offering guidance on timing, but had said in July that the USD 500 mn offering was in “advanced stages.” The Madbouly government has positioned the bond as the first sovereign green issuance in the region.

What’s a green bond? Funds raised from green bonds are typically used to finance green and environmentally friendly projects. Egypt currently has a portfolio of USD 1.9 bn-worth of green projects in the pipeline, including pollution reduction initiatives, renewable energy projects, low carbon transport, and sustainable water management systems. Bloomberg also had the story.

The planned issuance comes as part of the government’s broader debt diversification strategy that will see the government offer green bonds, sukuk, eurobonds, and potentially zero-coupon bonds to capture a wider investor base and shift the government’s budget financing towards longer-term borrowing. The strategy is meant to reduce our reliance on short-term debt instruments to plug fiscal deficits and help reduce the annual debt servicing bill to 20% of GDP and raise long-term debt to constitute some 52% of borrowing by June 2022.

And it’s not just sovereign green bonds that are in the making: CIB is expected to issue the country’s first corporate green bond issuance next month. The USD 65 mn offering will see the International Finance Corporation snap up the first tranche of the five-year bonds.

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