Egypt to sell up to $1.5 billion in debut ‘sukukk’ next week

As the north African country is seeking financial aid from IMF and regional allies and Arab Gulf countries, this sale of ‘sukuk’ would be Egypt’s first foreign bond since March 2022.

Egypt is now considering raising as much as $1.5 billion as early as next week via a debut sale of Islamic bonds known as sukuk, according to Bloomberg, citing unidentified sources referred to as ‘people with knowledge of the plans’.

The government could start roadshows for the sale this week, the sources said, asking not to be identified because the deliberations are private.

A potential sale will depend on market conditions, they said.

Officials at Egypt’s Finance Ministry didn’t immediately respond to requests for comment on Wednesday, stated Bloomberg.

As one of the Middle East’s most indebted countries, Egypt is in the process of trying to overhaul an economy tipped into crisis by Russia’s invasion of Ukraine, which sent food and energy prices soaring and hit tourism revenues.

Last week, Moody’s Investors Service downgraded the country’s credit rating deeper into junk territory, citing what it said was a declining ability to absorb shocks. 

Egypt picked Citigroup Inc, Credit Agricole SA, Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Plc and Abu Dhabi Islamic Bank PJSC for the potential sale.

As part of an economic revamp that aims to secure aid from the International Monetary Fund and regional allies, authorities revived a plan to sell stakes in state-controlled firms earlier this month.

Egypt’s recent $3 billion agreement with the IMF includes a commitment to shrink the footprint of state-run enterprises.

The IMF estimates Egypt’s external financing gap at around $17 billion throughout the 46-month program, and the deal is expected to unlock about $14 billion more from international and regional partners.

Egypt has about $39 billion in outstanding debt in dollars and euros, including $1.75 billion due this year and $3.3 billion next year, according to data compiled by Bloomberg.

Selling state assets

To raise dollars, the Egyptian government has put the state’s assets up for sale to hunt extremely needed foreign exchange.

Egypt, one of the region’s most indebted countries, is trying to overhaul an economy tipped into crisis by Russia’s invasion of Ukraine, which sent food and energy prices soaring and hit tourism revenues.

Last week Moody’s Investors Service downgraded the country’s credit rating deeper into junk territory, citing its declining ability to absorb shocks. 

Private companies in Egypt, whose role is central to job creation, have struggled to thrive in an economy dominated by state entities, in particular those belonging to the military.

This state dominance is an issue in Egypt and throughout the region, according to Belhaj.

“The state should not be the entrepreneur, the state is the regulator and frames the broader parameters of the economic activities,” he said.

Debt is also an issue in Lebanon, Tunisia and Jordan, Belhaj said, calling for efforts to improve transparency and the management of the economy. He also voiced concerns about regional jobless rates, especially among younger people.

“The youth in MENA are sitting there, many of them idle,” he said. By 2050, some 300 million young people will be “knocking on the door of the job market.”

“It is a huge liability but it’s an immense opportunity, and this is where the opening up to the private sector, rethinking the role of the state in the economy becomes simple,” he said.