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Sunday, 23 January 2022

Gov’t could turn to sustainable development bonds to help fund Decent Life

Egypt is considering the issuance of sustainable development bonds to finance the Decent Life initiative, International Cooperation Minister Rania Al Mashat said last week during talks with UN officials.

Sustainable development bonds? Think green bonds, but instead of financing energy efficiency and renewable energy initiatives, the money can be channeled into a wider range of projects considered socially beneficial (like education, health, housing or transportation).

But #1: It remains unclear precisely how regulators are defining their terms and we are yet to see the criteria laying out exactly how projects will be classified as socially beneficial.

But #2: We’re also a little unclear about whether the Financial Regulatory Authority would need to put together a new legal framework for the new securities or whether the government could issue sustainable development bonds under the existing green bond guidelines.

Think of this as the ministry planting a sign post. It will need in future to explain which authority could issue the bonds, when they could issue them, the size of the issuance, and the specifics on what the proceeds would finance.

This would be the first time the Egyptian government has issued a sustainable development bond, though it was responsible for selling the MENA region’s first-ever sovereign green bond back in 2020.

Sustainable development bonds on the EGX: The FRA is putting in place a framework that will allow companies to list sustainable development bonds on the EGX together with incentives to draw capital from hedge funds and private equity firms.

The Decent Life initiative: The four-year, multi-bn USD infrastructure project is attempting to upgrade infrastructure and basic services for rural communities across the country. By mid-2023, the government is pledging to have overhauled the delivery of public healthcare and education, upgraded road networks, built swathes of new housing, and improved access to sanitation and electricity in villages across Egypt.

Check out our project profile of the Decent Life initiative here.

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