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Tuesday, 24 August 2021

Sovereign sukuk sale coming in 2H FY2021-2022

Egypt is preparing to issue its first tranche of sovereign sukuk in the second half of FY 2021-2022, Finance Minister Mohamed Maait said in a statement today, less than a week after legislation allowing the government to sell the sharia-compliant bonds was signed into law. The ministry provided no further details on the timing, size or type of the planned issuance. Maait said in June that the ministry is considering a USD 2 bn sale but cautioned at the time that the exact size and timing of the issuance had not been finalized.

Returns and trading on the securities will be subject to the same tax rules as treasury bonds, Maait said, adding that the sukuk will be issued on both the local and international stock exchanges.

The news comes less than a week after the Sovereign Sukuk Act was signed into law, paving the way for the country’s maiden sovereign issuance of the sharia-compliant bonds. The bill sets up a regulatory framework allowing the state to issue a variety of sukuk in local and international debt markets.

Exec regs landing in November? The executive regulations for the legislation will be issued within the next three months, Maait said. The Financial Regulatory Authority (FRA) and Al Azhar are working with the ministry on the regulations, which when approved by the cabinet will set up a company to manage sukuk offerings and a regulatory body composed of legal, financial and religious experts to manage technical and legal issues. The ministry said earlier this year that it would begin working on the sale immediately after the regulations are published.

Issuing sovereign sukuk is part of a wider strategy to reduce government debt and shift towards longer-term borrowing. To diversify its debts, the ministry last year completed its maiden green bond issuance and is planning to sell new “floating rate” bonds, and is focusing on selling longer-term bonds to increase the average maturity.

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