Egypt's Finance Ministry eyes issuing sustainable development bonds

Published 05 Apr,2021 via Daily News Egypt - Egypt’s Minister of Finance Mohamed Maait has said that his ministry is looking to enter into new financing tools and issue sustainable development bonds in the near future.

Maait’s remarks came during his speech at the opening session of the third annual Hapi Economic Conference, on Monday, where he noted that the Egyptian government also aims to launch sovereign sukuk in the coming period.

The minister indicated that Egypt’s issuance of $750m worth of green bonds has ensured it was the first country in the Middle East to issue this type of vessel.

Maait said that the government aims to achieve a growth rate of 5.4% in fiscal year (FY) 2021/22, compared to a rate of 2.8% expected during the current FY of 2020/21.

The minister added that flexible policies contributed to achieving a real positive growth of 3.6% in the past fiscal year.

He explained that the government had put in place a firm framework to deal with emergency conditions and the repercussions of the novel coronavirus (COVID-19) pandemic.

Maait also said that he expects the overall budget deficit will decline to 7.7% in the current fiscal year, from 7.9% in FY 2019/20 to 6.6% in FY 2021/22.

The minister expects that state revenues would decrease during the current fiscal year to between EGP 150-160bn, compared to the target in the year’s budget.

Maait pointed out that if compared to the last fiscal year, it is expected that the total revenue will increase by 15% thanks to the increase in tax revenues.

He explained that due to the ongoing pandemic, the Egyptian state lost EGP 200bn of its total revenues last year. This was in addition to increasing expenditures to meet the needs of the state and support employment.

Meanwhile, Minister of Trade and Industry Nevine Gamea announced that a comprehensive mapping of the most important challenges facing the industry sector is being finalised.

Solutions will be presented in the form of a package of government decisions to contribute to supporting the national industry through the Industry Stimulation Committee, formed by Prime Minister Mostafa Madbouly.

Gamea heads the committee, which is scheduled to finish its work within the next two weeks, and reflects the political leadership and the Egyptian government’s efforts to overcome the challenges facing the industrial sector.

This comes in recognition of the sector’s role as the main driving force for a comprehensive economic development system.

She added that the Ministry of Trade and Industry had developed a balanced action plan in coordination with professionals working in the field of industry.

The plan was mainly based on providing solutions for the challenges that the sector is dealing with. It also provided unprecedented facilities to encourage investors to invest in the industrial sector, especially in new industrial complexes.

Gamea added that her ministry has adopted several economic policies and measures with the support and direction of President Abdel Fattah Al-Sisi and Prime Minister Madbouly. They have resulted in several initiatives to support the national industry with immediate and exceptional measures and decisions.

They aim to alleviate the severity of the global health crisis on Egyptian industry, and support it in maintaining production and export rates into various foreign markets.

Gamea noted that the Ministry of Trade and Industry has taken a number of containment measures to mitigate the effects on the industrial sectors as a result of the coronavirus crisis.

These measures aimed to ensure that production remains unaffected, and continues to meet local market needs in terms of goods and services, whilst continuing exports.

Hisham Tawfik, Minister of Public Enterprise Sector, expects to resume the government IPO programme during the third quarter (Q3) of 2021.

In a press statement on the sidelines of the Hapi Conference, Tawfik said that the government committee for IPOs and investment banks are discussing the best possible timing for implementation.

He explained that the investment opportunities for partnership with the private sector are numerous, and that there are 11 current opportunities in different sectors.

Tawfik said that there is a growth in the work of the ministry’s companies resulting from the addition of new departments that contribute to accelerating the pace of development. This includes a marketing department, as well as a central committee for investment, half of which are from outside the holding companies.

He explained that the companies affiliated to the ministry had settled a large part of the debts, amounting to EGP 33bn out of a total of EGP 40bn owed to various government agencies besides the National Investment Bank (NIB).

The minister emphasised that the amendment of the Public Business Sector Law restored the government’s control over subsidiary companies, and contributed to their keeping up with the governance systems followed in all sector companies.

Egyptian businessperson Naguib Sawiris said that the Egyptian Exchange (EGX) needs to support companies in order for its growth, and to help provide sufficient liquidity.

Sawiris added that investors are afraid of the EGX because it is small and there is not enough liquidity.

He indicated that countries such as the UAE and Saudi Arabia allocate tens of billions to be pumped into Egypt. The state is able to employ these investments and provide projects for them to invest in the stock market to help its growth.

On the other hand, Sawiris called on the Egyptian government to provide financing and put forward integrated projects and lands ready for licences. This would ensure that investors could take advantage of this current golden opportunity to attract foreign investors, coinciding with the suspension of many countries in the region.

He added that local banks could play a major role in the financing file to facilitate this for investors, saying, “Egyptian banks are better than foreign banks.”

Ayman Soliman, CEO of The Sovereign Fund of Egypt (TSFE), revealed the fund’s intention to increase its authorised capital from EGP 2bn to EGP 200bn and then to EGP 1trn. This will take place by expanding the base of assets it manages for the benefit of the state.

He said that TSFE directly manages some of its investments, including real estate investment, which is the return of unexploited assets and the development of tourism activity. Meanwhile, he also denied that the fund currently has an actual plan to directly invest in the EGX.

For his part, EFG Hermes CEO Karim Awad said that the UAE and Saudi Arabia’s sovereign funds are planning to invest in the Egyptian market during the coming period.

Awad added that the group noticed an increased demand on the Egyptian market through inquiries from Arab investors.

This comes in light of the existence of a promising investment market in terms of the size of economic activity and population numbers.

He explained that putting some government companies on the stock exchange would lead to the turnout of foreign investors and revitalise the stock exchange, which was measured in the prior promotion of offering a stake from Banque du Caire.

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