Egypt's sovereign sukuk oversubscribed 4x with highest return in 10 years

CAIRO - 22 February 2023: Egypt succeeded in issuing its first-ever issuance of sovereign Islamic sukuk, as the subscription was oversubscribed more than 4 times, according to Minister of Finance, Mohamed Maait.

 

 

The value of the issuance hit $1.5 billion, and the subscription on these sukuk amounted to about $6.1 billion.

 

The issuance was priced at 11 percent, which is the highest return ever on financial instruments offered by Egypt in the international markets, during at least the last 10 years.

 

Moody's granted a (P) B3 rating to Egypt's proposed $5 billion sukuk program, which will be used to finance investment and development projects, after downgrading the country's sovereign credit rating to B3 with a stable outlook, which reflects Egypt's declining ability to absorb external shocks.

 

The issuance attracted a new base of investors in the Gulf countries and East Asia as well as European countries and the United States of America, according to the Finance Minister’s statement, in addition to attracting investors, represented by asset managers, pension funds, insurance and investment funds, and banks, who are distinguished by their long-term investment retention, which has a positive impact in reducing price fluctuations.

 

“The offering comes in light of turbulent global economic and political conditions, and the high cost of financing as a result of a sharp inflationary wave,” Maait said.

 

Ahmed Kajouk, Deputy Minister for Financial Policies, explained that Egypt prepared for the offering by issuing the Sovereign Sukuk Law and its executive regulations to provide the necessary legislative umbrella for creating a new type of government securities that is compatible with the principles of Islamic Sharia.

 

The most important provisions of the law and its executive regulations are that the assets are privately owned by the state, and the Egyptian Financial The Egyptian Financial Company for Sovereign Taskeek; an Egyptian joint stock company wholly owned by the Ministry of Finance, supervises these assets, according to Mohamed Hegazy, head of the Public Debt Management Unit at the Ministry of Finance.

 

The issuance proceeds will be directed to the investment and development projects included in the economic plan of the state's general budget.

 

The Egyptian Ministry of Finance established an international program for issuing sovereign sukuk for the next several years, at a value of $5 billion. It was registered on the London Stock Exchange on February 14, 2023, which Moody’s granted it a rating of (P) B3.