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Tuesday, October 4, 2022

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Egypt’s Islamic facility: Supporting the budget

The government of Egypt, through the Ministry of Finance, has launched its debut syndicated facility featuring an environmental, social and governance (ESG) term loan and an Islamic term financing tranche, worth a total of US$2 billion. NESSREEN TAMANO writes.

The facility, for which Emirates NBD Capital and First Abu Dhabi Bank were mandated as the joint global coordinators and initial lead arrangers and bookrunners, holds a tenor of three years.

The ESG tranche would be used to finance green projects as outlined in the ministry’s Green Financing Framework launched in September 2020, while the Islamic tranche, which amounts to US$500 million, would go toward financing the public budget deficit.

“This is in line with the (Egyptian) government’s keenness to diversify sources of funding and meet the necessary requirements and needs of the state’s public treasury,” the ministry said.

The transaction comes on the heels of the government’s successful repayment of a previous facility it obtained, also valued at US$2 billion. Egypt was, according to the IMF, one of the few emerging market countries to experience a positive growth rate in 2020 amid the coronavirus crisis, and the World Bank predicts its GDP growth to rise from 3.3% to 5% for the financial year 2021/2022.

In the Islamic finance space, the Ministry of Finance has revealed that it plans to issue the country’s debut sovereign Sukuk at up to US$2 billion by the first half of 2022, with the proceeds also bookmarked to plug the budget deficit. The announcement follows Egypt’s finalization and implementation of its long-awaited Sovereign Sukuk Law, to be formally published in November 2021.

Egypt’s Islamic term financing
US$500 million

7th October 2021
  
Aggregate sizeUS$2 billion
TranchesUS$1.5 billion – conventional term loan
US$500 million – Islamic term financing
TypeSyndicated financing facility
TenorThree years
Joint global coordinators/initial lead arrangers and bookrunnersEmirates NBD; First Abu Dhabi Bank
Use of proceedsConventional tranche: To finance green projects
Islamic tranche: To support the public budget deficit

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