Sisi ratifies sovereign sukuk law

CAIRO – 18 August 2021: President Abdel Fattah El-Sisi ratified Wednesday the Sovereign Sukuk Law, after the approval of the House of Representatives.

According to the Egyptian Gazette, the first article stipulates that the provisions of the accompanying law regarding sovereign sukuk are implemented, and the provisions of any other law that contradicts its provisions shall not apply to them.

It stated that the second article includes the issuance of the executive regulations of the accompanying law by the Council of Ministers within 3 months from the date of its implementation, based on a proposal from the Minister of Finance and after taking the opinion of Al-Azhar and the Financial Supervisory Authority.

As for the third article, it shall be published in the Official Gazette and shall come into force from the day following its publication.

On June, the House of Representatives gave a final approval to a draft law submitted by the government to issue the Sovereign Sukuk Law.

The second article of the draft law specifies aspects of using sovereign sukuk to finance investment, economic and development projects included in the economic and social development plan of the state’s general budget.

The draft law stipulates that the maximum term of the Sovereign sukuk is thirty years, and the sukuk may be reinstated after the end of its original term for a similar period or periods in accordance with the provisions of this law.

The law stipulates in Article 4 that the owner of the instrument does not own a share in the assets and that he has a lump-sum return or attributable to the value of the instrument.

The draft law comes within the framework of the government's endeavor to develop new mechanisms and means to finance the state's general budget deficit, and to diversify sources of funding. By introducing new products to the debt instruments market and developing its mechanisms, in a way that stimulates the demand for government issuances of securities and debt instruments that are issued in local and foreign currencies.

The parliamentary report of the Economic Affairs Committee of the House of Representatives confirms the importance of a draft law submitted by the government to issue the Sovereign Sukuk Law, which is to be discussed during the plenary session tomorrow, Sunday, especially as it comes within the government’s plan to diversify the investor base in government securities, as it will attract a new segment of investors who prefer dealing with Islamic formulas.

The Parliamentary Committee believed that the Egyptian market is one of the largest in the Middle East, and it must be an integrated market that provides all types of securities and various government debt instruments. Therefore, the absence of sukuk as a tool compatible with Islamic Sharia regulations was considered a weakness in the Egyptian markets, especially in light of a global rush for this type of financial instruments.