The Madbouly government plans to take EGP 25 bn worth of local sukuk to market this fiscal year, with the first issuance to take place before the end of 2025, a senior government official told EnterpriseAM.

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As things stand: The Finance Ministry has finalized the sukuk program’s schedule, the source said, adding that the issuances will come in the form of short- and medium-term tranches.

Tranche one: The first issuance, which would mark Egypt’s first-ever local sovereign sukuk issuance, might be small in size to assess investors’ appetite, the source said. The Finance Ministry is currently meeting with banks eligible for subscription to finetune the issuance plan. The issuance is almost ready to go, with around 90% of the required steps already completed, our source added.

REFRESHER- We were previously told that the first two tranches of the program will be valued at EGP 3-4 bn, and that they will be offered before the end of this year.

What are we waiting for? A pricing framework is currently being developed for the local sukuk, the source noted. At the same time, officials are identifying the assets that will be used as collateral for these sukuk, the source said, adding that the ownership of these assets will not be transferred.

To back the sukuk: A new Ras Shukeir project involving one of the Gulf’s sovereign wealth funds — the first in a series linked to the 174 sq km Ras Shukeir zone on the Red Sea — will back the local sukuk issued by the Finance Ministry, with proceeds earmarked for reducing public debt.

To sweeten the pot: The government plans to introduce incentives and mechanisms to create an open market and attract Islamic banks and investors from the Middle East and Asia to the issuance, the source noted.

The primary objective? The government wants to diversify its debt instruments and attract more investors to the local debt market with lower interest payments and borrowing costs, our source said.

REMEMBER- The government’s financing gap for the current fiscal year is expected to reach EGP 3.6 tn, marking a 25% y-o-y increase. The government plans to cover the budget deficit through issuing new local debt instruments worth EGP 2.2 tn in treasury bills and some EGP 928.9 bn in treasury bonds as part of the government's plan to raise spending on social welfare and fill the budget shortfall.

We’re awaiting the new debt strategy: The Finance Ministry is working on its new public debt strategy for 2025-2030, which government sources have previously told us could be released during 1Q FY 2025-2026. The strategy aims to diversify the country's public debt instruments and introduce new ones, seeking to secure funding with varied and more competitive interest rates.

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