An EGP-denominated sovereign sukuk issuance is in the works: The government is planning to issue its first EGP-denominated sovereign sukuk in the domestic market in the next fiscal year, a senior government source told EnterpriseAM. The move aims to finance public investments outside of the general budget, and comes as government entities begin to prepare their FY 2025-26 budgets, the source noted.

Remember: Our maiden sovereign sukuk issuance in international markets in 2023 raised USD 1.5 bn and was more than 4x oversubscribed, attracting an order book of USD 6.1 bn.

The details: The sukuk will be issued in a series of tranches for government entities under the sovereign sukuk program, with the government currently exploring various sukuk types, including ijara, murabaha, and istisnaa, among others.

The rationale: The new issuance comes as the government seeks lower domestic and international borrowing costs alongside financing for development projects at a time when the state has capped public investment at EGP 1 tn for the current fiscal year. It also comes as the government has been exploring potential routes for re-entering international debt markets, with previously discussed options, including the issuance of USD-denominated bonds, sukuk to meet rising global demand, or bonds backed by guarantees from institutions like the IMF to lower borrowing costs.

We had an inkling that a sukuk issuance was coming: Finance Minister Ahmed Kouchouk last month said that the government was considering EGP 5-10 bn worth of green bond and sukuk issuances during the last two quarters of FY 2024-25.

Could a Eurobond issuance be next? Finance Minister Ahmed Kouchouk told foreign investors in London earlier this year that Egypt was set to issue USD 3 bn in Eurobonds and other debt instruments in FY 2024-25.

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