The Finance Ministry is set to issue the second EGP 3 bn tranche of Egypt’s first-ever local sukuk next Monday, a senior government official with knowledge of the matter told EnterpriseAM. The issuance settlement is scheduled for the following day.

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REMEMBER- The first tranche of our maiden local sukuk issuance was almost 5x oversubscribed, attracting an order book of EGP 14.9 bn earlier this month. The Finance Ministry received 63 offers from banks participating in the auction but only accepted 10, covering its EGP 3 bn target. The high demand brought yields down to 21.56% from 28% as a competitive pricing mechanism was employed, our sources told us at the time.

About the new issuance: The second tranche is a three-year ijara issuance — a leasing-based Islamic security — with a semi-annual return, and is linked to assets owned by the Finance Ministry, our source confirmed.

We now have an attractive yield precedent: The low yield on the first issuance “has set a good pricing structure to be relied on for the periodic issuance of shariah-compliant instruments,” according to the source.

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.

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