Egypt is set to issue its first batch of sovereign bonds (Islamic sukuk) during the second half (2H) of the current FY2021/2022, Minister of Finance Mohamed Maait announced on Tuesday.

The minister said that the timing and the value of the offering will be set later.

Maait explained that the offer’s proceeds will provide the required finances for the investment projects that are included in the economic and social development plan of the state’s public budget for FY2021/22.

In June, Maait stated that the value of the soon-to-be-issued sukuk is expected to reach a total of $2 billion.

Following receiving cabinet approval in November 2020, the House of Representatives — the parliament — approved the sovereign bonds (Islamic sukuk) bill, which is waiting on a final vote that must end in a two thirds majority.

However, on 27 July, the House of Representatives announced its adjournment for summer recess.

The bill paves the way for Egypt’s government to usher in an Islamic financing system, which recorded $2.7 trillion in transactions globally by the end of June, according to Maait.

Maait expounded that the bill’s bylaws will be issued within three months in collaboration with the Financial Regulatory Authority (FRA) and Al-Azhar’s grand imam to issue the bonds in a way that is compatible with Islamic Sharia.

He also declared that the anticipated Islamic sukuk’s proceeds will be subjected to the tax measures applied on the treasury bills (T-bills).

Furthermore, sukuk issued in the domestic market will be listed in the Egyptian stock exchange, while those issued in hard currency will be listed in international stock markets, which will provide extra cash liquidity for Egypt’s economy as well as decrease the investment finance cost.

“A supervisory committee is set to be formed as soon as the cabinet approves the Islamic sukuk bill’s bylaws, which will include finance, law, and economy experts, as well as a number of Al-Azhar scholars,” Maait explained.

He added that Islamic sukuk will allow the utilisation of state-owned assets according to the beneficial right system through either ownership without usufruct or renting.

According to the rules for purchasing Islamic sukuk, the issuer must make a contractual promise to buy back the bond at a future date at par value.

Sukuk are financial certificates issued in Islamic countries that allow investors to have a share of ownership in a portfolio of existing or eligible assets.

Despite the COVID-19 crisis, sukuk supply is expected to witness a surge in the 2H of 2021 after experiencing strong growth during 2Q of 2021, backed by strong investor appetite and issuers’ refinancing and funding diversification needs, according to Fitch Ratings.

Throughout September and October 2020, Egypt issued sovereign governmental green bonds worth $750 million domestically and in the London exchange stock market, the first of their kind in the Middle East and North Africa.