The Ministry of Finance has successfully launched its first sovereign sukuk issuance in the local market, raising EGP 3 billion through the primary dealer system. The sukuk, which has a three-year maturity period, is a key part of the Ministry’s strategy to diversify its funding sources and strengthen Egypt’s financial position.
This issuance aims to reduce government borrowing costs, broaden competition in the financial market, and attract a wider pool of investors, particularly those interested in Sharia-compliant financial instruments. By introducing this new financial product, the Ministry hopes to tap into a previously underserved segment of investors, ultimately contributing to a more diverse investor base.
The issuance saw strong demand, with the total amount raised being oversubscribed by five times. The average yield for the sukuk came in at 21.56%, representing a 26.2 basis point decrease from the indicative yield of 21.82% on conventional bonds issued the previous week. Furthermore, the yield on the sukuk was 14.3 basis points lower than that of treasury bonds issued on the same day with a similar maturity (21.703%).
The primary market offering saw the participation of 16 banks, including four Islamic banks operating in Egypt: Faisal Islamic Bank, Abu Dhabi Islamic Bank (ADIB), Al Baraka Bank, and Kuwait Finance House. This marks a significant step towards expanding Egypt’s Islamic finance sector, as the sukuk structure aligns with Islamic Sharia principles, notably through the Ijara (lease) structure.
In addition to the initial issuance, the Ministry has established a sovereign sukuk program with a total size of EGP 200 billion. This program will allow for several future sukuk issuances, further diversifying Egypt’s funding options and allowing for more flexible debt management in the years to come.
This issuance is part of a larger government strategy aimed at reducing Egypt’s debt servicing costs and extending the maturity of its debt portfolio. The sukuk program is expected to play a critical role in ensuring financial stability and broadening the country’s debt management options.