The country’s first-ever local sukuk issuance was almost 5x oversubscribed, attracting an order book of EGP 14.9 bn, upon the closure of the subscription period yesterday, a senior government official told EnterpriseAM. The Finance Ministry received 63 offers from banks participating in the auction, but only accepted ten, covering its EGP 3 bn target.

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The high demand dragged yields down to 21.56% from 28%, our source said, explaining that a competitive pricing mechanism was employed to manage the auction’s yield.

About the issuance: The EGP 3 bn, three-year ijara issuance — a leasing-based Islamic security — is linked to assets owned by the Finance Ministry in the Red Sea’s Ras Shukeir area, a source previously told us. It is scheduled for settlement today.

The issuance is part of a wider sukuk program, which was recently quadrupled on the back of strong demand to EGP 200 bn for the fiscal year, a senior government source told us. The government originally planned to take EGP 25 bn worth of local sukuk to market this fiscal year, before doubling its target amid strong appetite.

The program is part of the Finance Ministry’s strategy to diversify its debt issuances in efforts to decrease the cost and burden associated with servicing the public debt, which consumes 80% of revenues and 50% of general expenditures.

What’s next? The Finance Ministry also plans to extend the maturity of the new sukuk issuances after using the first tranche to establish a pricing framework, with the aim of launching a weekly issuance with maturities ranging between 3, 5, and 7 years, our source previously said.

IN OTHER LOCAL DEBT NEWS-

The Finance Ministry has raised its local debt target for November to EGP 1.08 tn, up from EGP 845 bn in October, a government source told EnterpriseAM. T-bills will make up the larger share of the targeted issuances.

REMEMBER- The Madbouly government is targeting a USD 1-2 bn annual reduction in the Finance Ministry’s external debt and to bring down the debt-to-GDP ratio to 80% by the end of June 2026. This target relies on the domestic market to cover financing needs, our source said.

Local banks are still taking the lion’s share: Demand from Egypt’s banking sector for local debt instruments has grown relative to that of foreign investors in the current period, thanks to shrinking yields within the banking system, improvements in the economic landscape including the USD / EGP exchange rate, the source explained. The higher demand for local debt coverage from banks was driven by a rise in individual investments in debt instruments through their banks, coinciding with the government’s efforts to lengthen the maturity of public debt, the source added.

AND- The return of the seven-year bond? The Finance Ministry is considering issuing seven-year bonds for the first time in years in December, reflecting the growing investor confidence in the Egyptian economy, according to the source. December is also when the ministry plans to launch the public debt strategy, which aims to reduce public debt to below 75% of the GDP within three years, down from 85% in the last fiscal year, while also lowering debt servicing costs to 7% of GDP and extending the debt maturity to five years.

The budget deficit is expected to narrow to 7.3% of GDP this fiscal year, down from an estimated 7.6% last fiscal year. Meanwhile, the financing gap for the current fiscal year is estimated at around EGP 3.6 tn. To that end, the Finance Ministry plans to issue fresh local debt instruments worth EGP 3.2 tn — EGP 2.2 tn in T-bills and around EGP 928.9 bn in T-bonds — according to official figures seen by EnterpriseAM.

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