US$2 billion sovereign Sukuk for Egypt? (by IFN)

EGYPT: The government is reportedly preparing to raise around US$2 billion through its first sovereign Sukuk issuance as it seeks to build up declining public funds.
According to Islamic scholar Sheikh Hussein Hamid Hassan, the Egyptian government is convinced that a foreign currency Sukuk will fund the country’s development projects and plug a leak in its foreign reserves, which fell US$1.77 billion to US$16.35 billion in January. The reserves are down by more than 50% since its political revolution a year ago.

“The Sukuk will be in US dollars or Euros; or maybe a combination. It will be around US$2 billion, issued in several tranches targeting mainly Egyptians living outside Egypt,” said Sheikh Hussein.

S&P downgraded Egypt’s ratings to ‘B’ from ‘B+’ on the 10th February as a result of its sharp decline in foreign exchange reserves and its ongoing political uncertainty. “There would be a further downgrade if the Egyptian government failed to stem the decline in reserves, or an uncertain policy environment and weak institutions emerge from the ongoing political transition,” said the ratings agency.
The country’s anxiety over funding has led it to seek US$1 billion from the World Bank and the African Development Bank. According to Momtaz al-Saeed, its finance minister, the country needs US$11 billion to finance economic reform.

Its potential sovereign Sukuk could make up some of the US$2.5 billion-worth of US dollar-denominated bonds said to be for sale by the end of this month.

With the country’s dire need of funds and the Islamist Freedom and Justice Party and the Nour Party set to make up its national coalition government, could Islamic funding emerge as the answer for Egypt’s shrinking coffers?