DUBAI: Egypt, which has been forced to rely on local banks for funds in the wake of last year’s popular revolt, is laying the groundwork for a debut sovereign Islamic bond, or sukuk, said a person familiar with the matter on Wednesday.
"Egypt is preparing one," he said. "But the government is studying a new legal structure that will allow them to issue a sovereign sukuk. They’re working on both at the same time."
It is too early to determine the size of the issue but the North African country is considering a murabaha structure, he said.
Murabaha is a cost-plus-profit arrangement which complies with Islamic law.
Egypt this week began negotiating $3.2 billion in support from the International Monetary Fund and talks could take 2-3 months, an IMF official said.
Analysts say Egypt is in desperate need of international support to avert a financial crisis, but any agreement is unlikely to prevent a drop in its currency or see any quick revival of the investment needed to fuel growth.