Egypt’s Finance Ministry has launched a new EGP 200bn ($4.2bn) sovereign sukuk programme for the local market, as part of its strategy to diversify its investor base and reduce the cost of debt servicing, the ministry said.
In a statement on Tuesday, the ministry announced that the first issuance under the programme, a three-year, EGP 3bn sukuk, was offered on Monday and was about five times oversubscribed.
The sukuk was structured as an Ijara, compliant with Islamic law. The ministry said the programme’s issuances will receive the same tax and accounting treatment as government treasury bonds.
The average yield on the first sukuk issuance was 21.56%, which was 26.2 basis points (bps) lower than the benchmark yield of 21.82% for conventional bonds issued the previous week, the statement said. The average yield was also about 14.3 bps lower than treasury bonds of the same tenor issued on the same day, which had an average yield of 21.703%.
The primary market offering was conducted through public auctions, with subscriptions accepted from 16 primary dealer banks in addition to the four Islamic banks operating in Egypt: Faisal Islamic Bank, Abu Dhabi Islamic Bank-Egypt, Al Baraka Bank Egypt, and Kuwait Finance House-Egypt.
The ministry said the initiative aims to attract a new segment of investors interested in Sharia-compliant financial instruments, which will help to diversify funding sources, reduce financing costs, and extend the maturity of the debt portfolio.
