Egypt’s next sovereign green bond sale may see AIIB as its guarantor

AIIB may back Egypt’s upcoming second sovereign green bond sale: Egypt’s government is reportedly in talks with the Asian Infrastructure Investment Bank (AIIB) to guarantee an upcoming green bond issuance, AIIB President and Chairman Jin Liqun is quoted as telling Bloomberg on the sidelines of the Summit for a New Global Financing Pact in Paris on Thursday. The guarantee will be “the first such backstop it has ever issued,” according to Jin, who did not disclose any information about the size, timeline, or currency denomination of the bond sale or what portion would potentially be guaranteed by AIIB.

SOUND SMART- Guaranteed instruments issued by development banks provide a safety net for investors by guaranteeing a debt will be repaid to a lender by a third party in the case the borrower defaults.

The agreement would expand accessibility + affordability for Egypt’s climate projects: The guarantee would give Egypt easier access to capital markets at low borrowing costs and allow access to finance for wind farms and other climate projects, Jin said, adding that this will be the first time the AIIB will act as a guarantor for this kind of bond.

AIIB’s move follows those of its peers: The Inter-American Development Bank recently guaranteed repayment of loans in debt-for-nature swaps in Ecuador and Barbados, which Jin notes is a “very interesting” tool that his bank may consider in the future. The UK has provided a guarantee of EUR 80 mn to the AfDB to support phase 3 of Egypt’s El Gabal El Asfar water treatment plant.

When we know about the issuance so far: Egyptian Finance Minister Mohamed Maait said in September that the government is looking at the possibility of issuing a green eurobond “soon,” depending on market conditions. The country’s Finance Ministry signaled in 2022 that it is looking to take a USD 750 mn green bond issuance to market, matching Egypt and the Middle East’s first sovereign green bond issuance in 2020.