Egypt prepares to issue its first sovereign sukuk in H2 of 2021-2022

CAIRO – 24 August 2021: Egypt is preparing to issue the first sovereign sukuk offering during the second half of the current fiscal year 2021/2022, according to Minister of Finance Mohamed Maait.

“This contributes to providing the necessary funding for investment projects included in the economic and social development plan in the state’s general budget, to achieve development goals in a manner consistent with the state’s efforts to enhance aspects of spending on improving the standard of living of citizens,” Maait clarified Tuesday.

He pointed out that the timing, size and type of offering will be determined later.

The minister added in a statement, that work will be done to issue the executive regulations of the law within 3 months, in cooperation with the Financial Supervisory Authority and Al-Azhar Al-Sharif; This is to give a legal and technical character in accordance with formulas compatible with the principles of Islamic Sharia, in a way that contributes to attracting a new segment of Egyptian and foreign investors wishing to invest in accordance with Islamic law in both local and foreign currencies.

The minister indicated that the tax treatment prescribed for treasury bonds will also apply to the returns of sovereign sukuks and the return on trading on them, so that the sukuks issued in the local market are listed on the stock exchange, and they are kept in the Central Depository and Custody Company.

He pointed out that sukuk issued in international markets issued in foreign currencies are listed on international exchanges in accordance with the rules followed for intergovernmental issuances; This contributes to providing additional cash to the Egyptian economy and reducing the cost of financing investments, especially that these sukuk are issued according to formulas that are compatible with Islamic Sharia principles.

The minister explained that as soon as the Council of Ministers approves the issuance of the executive regulations of the law, work will be done to form a “oversight committee” consisting of economics, finance and law experts and some scholars of Al-Azhar Al-Sharif, and it will be concerned with summarizing the issuances technically and legally, in addition to establishing a state-owned company to manage and the implementation of the process of “sinking” the government’s sovereign sukuk.

He stated that the issuance is carried out in accordance with any of the formulas compatible with the principles of Islamic Sharia approved by the Control Committee stipulated by law, and on the basis of the issuance contract, and its issuance, circulation and redemption are subject to controls, rules and procedures that are compatible with the principles of Islamic Sharia.

He stressed that the issuance of sukuk is on the basis of assets that will be privately owned by the state, by selling the right of usufruct of these assets without the right of neck, or by leasing them, or by any other method consistent with the contract for issuing these sukuk in accordance with the principles of Islamic Sharia, provided that A decision by the Prime Minister defining the fixed and movable assets owned by the state as “private property” on the basis of which the sukuk are issued, so that there is a mechanism to assess the right to use those assets on the basis of which the sukuk are issued or in return for leasing them for this purpose.

He pointed out that the sukuk will be issued in the form of a paper or electronic certificate with the specifications determined by the executive regulations of the law, and it will be nominal, of equal value, and issued for a specific period in Egyptian pounds or foreign currencies through public or private offerings in the local market or in international markets.

The minister said that the maximum period for determining the usufruct of the assets on the basis of which the sukuk are issued or the term of their lease is 30 years in compliance with the provisions of the constitution, and these assets may be leased back to the issuer, stressing that it is prohibited to seize or take executive measures on the assets on the basis of which the sukuk are issued, with The invalidity of any action or behavior contrary to that, and the imposition of a criminal penalty on the violators.