An illustrative image showing an Egyptian hundred and two hundred bill. AFP
The offering is part of a broader strategy to diversify financing tools, reduce borrowing costs, and attract new investor segments, particularly those seeking Sharia-compliant instruments. It also aims to extend the average maturity of public debt and deepen competition in the government securities market.
The sukuk issuance was oversubscribed nearly fivefold, with accepted bids yielding an average return of 21.56 percent, 26.2 basis points lower than the benchmark yield on conventional bonds issued the previous week. Compared with treasury bonds of the same maturity issued on the same day, the sukuk yield was 14.3 basis points lower.
The offering was conducted via public auction, with participation from 16 primary dealer banks and Egypt’s four Islamic banks: Faisal Islamic Bank, Abu Dhabi Islamic Bank, Al Baraka Bank, and Kuwait Finance House.
The issuance falls under Egypt’s sovereign sukuk programme for the local market, structured under the Ijara model in line with Islamic finance principles. The programme has a total capacity of EGP 200 billion and is subject to the same tax and accounting treatment as conventional treasury bonds.
The Finance Ministry said the sukuk issuance schedule is published quarterly on its official website as part of its commitment to transparency and investor outreach. The initiative supports the government’s goal of expanding its investor base and lowering debt-servicing costs.
Issuing sukuk in local currency is designed to strengthen and develop the domestic financial markets while minimising financial risks.
By borrowing in its own currency, the government avoids exposure to foreign exchange risk, which can significantly increase repayment costs if the local currency depreciates.
This approach contributes to financial stability and broadens the investor base by attracting local institutional investors who prefer investments denominated in their own currency to better match liabilities and reduce currency risk.
Local-currency sukuk also promote the growth of Sharia-compliant financial products, supporting the development of Islamic finance and providing more diverse investment opportunities for domestic investors.
Additionally, borrowing in local currency can result in lower borrowing costs, as investors do not demand extra compensation for currency fluctuations.
Ultimately, local-currency sukuk offer a more sustainable and resilient financing option for governments, helping fund key development projects while safeguarding the economy from external shocks linked to currency volatility.
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