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Thursday, 5 November 2020

Egypt moves closer to first sovereign sukuk sale as cabinet approves draft law

CABINET WATCH- We’re one step closer to our first-ever sovereign sukuk issuance after the Madbouly Cabinet yesterday approved a bill authorizing sukuk sales. The executive regulations for the bill are expected to be issued within three months of it being ratified by the president. Reuters took note of the bill winning cabinet signoff

The government will take the securities to market as soon as the bill is ratified, Finance Minister Mohamed Maait said in a statement following the meeting. The size of the country’s inaugural sale is still unclear.

The bill defines the different types of sukuk, which includes the basic ijara and mudaraba, which set up a partnership between the government and a special purpose vehicle (SPV) that manages state-owned assets; istisna sukuk, whose proceeds are specifically allocated to industrial and infrastructure projects; and murabaha sukuk that involve a sale of an asset or commodities under spot contracts. The Finance Ministry would be able to issue both EGP- and foreign currency-denominated securities.

The bill also governs how the debt is securitized and traded, as well as the rights and responsibilities of sukuk holders and SPVs that execute and manage sukuk sales. Other elements involve establishing a regulatory oversight committee, clarifying how disputes between the government and sukuk holders would be handled, and setting up an association to protect the rights of investors, the statement said without going into further details.

The anticipated sukuk issuance comes as part of a plan to diversify its sources of funding and lengthen the average maturity of its debt. Green bonds are also part of the plan: Egypt became the first country in the region to sell the climate-friendly securities when it completed a USD 750 mn issuance in September.

Also from the cabinet meeting:

Three bills that authorize the Oil Ministry to sign oil exploration contracts earned cabinet signoff. IEOC, Eni’s joint venture with the EGPC, and Russian firm Lukoil will explore and develop the Meleiha concession in the Western Desert, while a second contract will see EGPC collaborate with BP in the Gulf of Suez. The third agreement brings together state-owned South Valley Egyptian Petroleum Holding Company (Ganope) and Enpedco, a company majority-owned by the military’s National Service Projects Organization, to explore a region in the Eastern Desert.

An agreement between the National Authority for Tunnels and Chinese consortium AVIC-CREC was approved, allowing the companies to begin implementation of phase two and three of the electric train project. Phase one of the project stretches a 70-km line between Al-Salam City, the New Administrative Capital, and Tenth of Ramadan City, and is expected to be completed in two years and serve some 350k passengers per day.

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