By Noah Chasek-Macfoy
The Egyptian General Petroleum Corporation (EGPC) will receive EGP14 billion in Islamic financing to settle overdue debts. The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group, signed a new agreement with state-owned EGPC on Monday to provide it with nearly US$235 million through an Islamic financing scheme.
The new funds come under a three year, US$1 billion framework agreement to fund petrol and strategic food commodities, signed by the Saudi-based ITFC and the Minister of Planning and International Cooperation earlier this year.
The Minister of Finance, Momtaz Saeed, said the loan would be guaranteed by the Egyptian Central Bank if the EGPC was unable to fulfil its financial commitments.
The cash infusion comes while Egypt is facing an ongoing shortage of petroleum products. The domestic gas crisis has led to hours-long waits at gasoline stations at various times this year. Shortages have driven up the price of household butane both officially and on the black market.
In the midst of the hardships, the EGPC is sinking under overdue financial obligations to international oil corporations operating within Egypt. Reports state that these unfulfilled commitments reach over US$4 billion. The EGPC has been forced to borrow to settle these overdue payments, for fear that large oil corporations like BP, which accounted for 40 per cent of Egypt’s total gas production in 2011, might cease operations in Egypt.
Islamic Finance has been a growing trend in Egypt following the ouster of former President Hosni Mubarak, the success of Islamic parties in parliamentary elections and the ascension of Mohamed Morsy to the presidency.
According to Emirati newspaper The National, the Muslim Brotherhood wants to boost the market share of Islamic banks to 35 per cent in five years, from five per cent now. As recently as this month, Prime Minister Hesham Qandil confirmed that Egypt would issue Shari’a sanctioned sukuk bonds within three months.
The EGPC has also reached out to non-Islamic fanciers to settle its dues. The Wall Street Journal reported that JPMorgan, Morgan Stanley and BNP Paribas have all issued loans to the company.