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Sunday, 9 January 2022

Get ready for Sovereign Sukuk Act exec regs

Sovereign Sukuk Act exec regs about to drop? The government is looking to finalize the executive regulations of the Sovereign Sukuk Act by the end of the month, setting the stage for the country’s c.USD 2 bn maiden issuance before the end of the fiscal year in June, Mohamed Hegazy, head of the Finance Ministry’s debt unit, told Bloomberg Asharq. The Financial Regulatory Authority (FRA) and Al Azhar are working with the ministry on the regulations, which were previously expected to be issued by November last year.

Maiden USD 2 bn sovereign sukuk issuance could come in 1H2022: Egypt could make its first sovereign sukuk issuance to the tune of USD 2 bn within the next five months, Hegazy said. His comments confirm details set out by Finance Minister Mohamed Maait last summer on the potential timing and size of the issuance. Maait made the remarks after the long-awaited Sovereign Sukuk Act was signed into law in August

What we know about the issuance: Returns and trading on the securities will be subject to the same tax rules as treasury bonds, Maait said previously, adding that the sharia-compliant bonds will be issued on both the local and international stock exchanges.

Issuing sovereign sukuk is part of a wider strategy to reduce government debt and shift towards longer-term borrowing. To diversify its debt portfolio, the ministry completed its maiden green bond issuance in 2020 and is planning to sell new “floating rate” bonds, and is focusing on selling longer-term bonds to increase the average maturity.

The state is also looking to issue green bonds greater in value than those issued in 2021, Hegazy added. The government held the region’s first sovereign green bond issuance last September, raising USD 750 mn from investors to channel into green projects. Private sector bank CIB issued Egypt’s first corporate green bond back in November, raising USD 100 mn in a five-year, fixed-rate offering.

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