President Abdel Fattah Al-Sisi has issued Presidential Decree No. 303 of 2028, allocating a parcel of state-owned land—measuring approximately 41,515.55 feddans (equivalent to 174.4 million square metres)—in the Red Sea Governorate to the Ministry of Finance. The allocation is aimed at supporting public debt reduction efforts and facilitating the issuance of sovereign sukuk, in accordance with the relevant laws and regulations.
The decree is clear and transparent, and from it the following key points can be inferred:
First, the land in question is state-owned and has been allocated—not sold—to the Ministry of Finance. This means the Ministry has no right, either now or in the future, to sell this land to any local or foreign entity.
Second, the primary purpose of this allocation is to reduce public debt and support the issuance of sovereign sukuk, in full compliance with applicable legislation.
But what is the story behind the planned sovereign sukuk issuance expected before the end of this year? And how does it relate to this land allocation?
Quite simply, the aim is to provide a valuable state asset that the Ministry of Finance can leverage—either through direct investment or derived investments—via the issuance of sovereign sukuk. The net proceeds will then be directed towards narrowing the budget deficit and reducing overall public debt.
Sovereign sukuk are financial instruments designed to meet the state’s funding needs for national investment projects and to support both economic and social development. Like treasury bonds and bills, they serve as a mechanism to finance the state budget deficit. However, they differ in three essential ways:
First, sukuk do not constitute debt obligations. Instead, they represent shared ownership in specific assets or projects. While conventional bonds are essentially loans to the government with fixed or variable interest, sukuk are backed by tangible assets—such as land or income-generating ventures derived from that land.
Second, sukuk are subject to investment risk. They can yield profits or incur losses, whereas traditional bonds offer fixed returns paid periodically or at maturity, regardless of project performance.
Third, sukuk are Sharia-compliant. They may take the form of Mudaraba (speculative partnership), Murabaha (cost-plus financing), Musharaka (joint venture), or Ijara (leasing), aligning with Islamic finance principles.
Globally, the sukuk market has witnessed steady growth over the past two years. Total Islamic financial assets now exceed $2trn, with a compound annual growth rate approaching 16%. Annual sukuk issuances surpass $200bn.
Leading sovereign issuers include: Malaysia 55% of global sukuk issuances, Saudi Arabia 20%, UAE 10% and Indonesia 5–7%.
New entrants to the sukuk market include countries such as Turkey and Egypt. The most common structures include Ijara, Musharaka, and Mudaraba.
Egypt successfully issued its debut sovereign sukuk in February 2023, raising $1.5bn. The offering attracted robust investor interest, with subscriptions reaching $6.1bn—more than four times the issue size—and was listed on the London Stock Exchange.
The strategic rationale behind allocating land to the Ministry of Finance—and thereby facilitating sukuk issuance—encompasses several integrated objectives:
- Empowering the Ministry of Finance to finance national investment and development projects or to restructure existing initiatives using proceeds from sukuk.
- Reducing the cost of public debt service, extending the debt maturity profile, and aligning with the state’s strategy to curb the growth of public debt.
- Establishing a local sovereign sukuk market, encouraging secondary trading in Egypt’s capital markets and attracting both domestic and foreign investors.
- Aligning with global economic trends, particularly as interest rates decline globally, which enhances the cost-efficiency and appeal of sukuk.
- Stimulating demand for government-issued financial instruments, including sukuk in both local and foreign currencies, and expanding into sustainable and green finance domains—such as sukuk for environmental and digital infrastructure projects.
- Enabling related activities such as securitisation, sukuk issuance management, and trading on local and international stock exchanges, ultimately fostering a secondary market for sovereign sukuk in Egypt.
In essence, the state’s decision to allocate this land to the Ministry of Finance is a forward-looking strategic move with substantial long-term benefits. It lays the groundwork for positioning Egyptian sovereign sukuk as a competitive and appealing financial instrument—especially in a global environment of falling interest rates—offering returns backed by real, productive assets.
Mohamed Abdel Aal – Banking Expert
