Minister of Finance Mohamed Maait has said that Egypt is preparing to issue its first sovereign sukuk during the second half (H2) of fiscal year (FY) 2021/22.
The offering will provide the necessary funding for investment projects listed in the economic and social development plan in the state’s general budget, to achieve development goals in line with the state’s efforts to enhance expenditures to improve citizens’ lives. He pointed out that the timing, size and type of offering will be determined later.
The minister added, in a statement today, that the executive regulations of the law will be issued within three months, in cooperation with the Financial Regulatory Authority (FRA) and Al-Azhar. The main goal is to make the law suitable with Islamic Sharia to attract new segment of Egyptian and foreign investors wishing to invest in accordance with Islamic sharia in both local and foreign currencies.
He pointed out that the tax treatment of treasury bonds will also apply to the returns of sovereign sukuk so that the sukuks issued in the local market are listed on the stock exchange and kept in MCSD, and the sukuks issued in international markets issued in foreign currencies will be listed on international exchanges, in accordance with the rules for intergovernmental issuances. This will provide additional cash to the Egyptian economy and reduce the cost of financing investments, especially since these sukuk are issued in accordance with formulas that are compatible with Islamic Sharia principles.
He explained that as soon as the Cabinet approves the issuance of the executive regulations of the law, an “oversight committee” will be formed, consisting of economic, financial, and legal experts, as well as some scholars of Al-Azhar.
He stressed that the issuance of sukuk happens on the basis of assets that will be privately owned by the state, by selling the usufruct of these assets by any other means consistent with the contract for issuing these sukuk in accordance with Islamic Sharia, provided that a decision issued by the Prime Minister defines the fixed and movable assets owned by the state as “private property” on the basis of which the sukuk are issued, so that there is a mechanism for evaluating the right to use those assets.
He noted that the sukuk will be issued in the form of a paper or electronic certificate. The specifications are determined by the executive regulations of the law. They will be nominal, of equal value, and issued for a specific period in Egyptian pounds or foreign currencies through public or private offerings in the local market or in international markets.
The minister said that the maximum period for determining the usufruct of the assets on the basis of which the sukuk are issued or the term of their lease is 30 years, in compliance with the provisions of the constitution. These assets may be leased back to the issuing authority. He also stressed that it is prohibited to seize or take executive measures on the assets on the basis of which the sukuk are issued. Any action or behavior contrary to that will be invalid, and a criminal penalty will be imposed on violators.