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Monday, 31 January 2022

We’re looking to join Euroclear during 2H2022 + Another round of green bonds

We likely won’t join Euroclear until 2H2022: Local Egyptian debt probably won’t be made “Euroclearable” until the second half of 2022 due to an unresolved “technical point” between the government and the Belgium-based clearinghouse, Finance Minister Mohamed Maait told CNBC Arabia (watch, runtime: 5:26).

Why is Euroclear a big thing for us? Having local debt cleared in Europe will make EGP bonds more accessible to foreign investors, who can currently only access the market through a small number of local banks. Making it easier for foreign funds to invest should translate into greater inflows into Egyptian debt.

A long time coming: The government has been working to meet Euroclear’s conditions since signing the initial agreement back in 2019. The ministry was originally expecting a final agreement in 4Q2021, which was then pushed into early 2022 as talks dragged on.

The hitch? Possibly the withholding tax on government debt, according to Euroclear’s head of global capital markets, Sudip Chatterjee, who said last year that the way Egypt calculates the tax needs to be brought in line with international norms. Egypt has fulfilled the remainder of the clearinghouse’s requirements, Maait said, which included setting up a central securities depository in addition to a number of technical, logistical and administrative terms.

Green bonds, round 2: The Finance Ministry is looking to take to the green bond market for a second time with another USD 750 mn issuance, Maait told CNBC.

There’s no word on when the sale could go ahead: Maait said that consultations are still ongoing regarding the timing of the sale. Egypt debuted sovereign green bonds in the MENA region in 2020 with a USD 750 mn issuance.

Issuance of Samurai bonds + sukuk are also in the offing: Maait said last week that Egypt is planning on issuing USD 500 mn in JPY-denominated bonds during the first six months of 2022. We’re also expecting the country’s maiden sovereign sukuk sale to take place before the end of the fiscal year in June.

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