Egypt’s first sovereign sukuk issuance critical step for economy: Fitch Ratings

Egypt's entrance into the sukuk market had been on the horizon for some time, and now it is a reality. It will be interesting to see whether Egypt will become a regular sukuk issuer or an infrequent one, Bashar Al-Natoor, the global head of Islamic finance at Fitch Ratings, told Ahram Online.

With a total value of $1.5 billion, Egypt successfully issued its first US-denominated sovereign bonds, Islamic sukuk, with a yield of 11 percent.

Some 250 investors from various global markets purchased these bonds, and their proceeds will be directed to finance public investment projects.

“It is a very critical step for the country and its economy. Egypt seeks to diversify its financial resources by attracting new types of investors who are interested in Islamic finance,” Al-Natoor added.

“There are main drivers for sovereigns to issue sukuk. Unlocking the potential of Islamic finance investment and diversifying funding sources come on top of the list. In some cases, the aim is also to develop the Islamic finance market and/or ensure that the Islamic banking sector has access to short- and long-term debt,” Al-Natoor noted.

He added that if a sovereign is ultimately successful in developing a benchmark and yield curve, this might open the door to other non-sovereign issuers in the country, and sukuk might become an option.

In 2021, prior to the war in Ukraine, Egypt planned to issue Islamic Sukuk with a value of $2 billion and took steps on the ground to secure financial facilities to issue this sukuk as well as green sukuk.