Egyptian parliament approves new sovereign bond law – Politics – Egypt
Speaker of Parliament Hanafy Gebaly said the final vote on the new bill will be postponed until a two-thirds majority of MPs are available.
Finance Minister Mohamed Maait told MPs that the new bill reflects the government’s new policy of diversifying funding sources, attracting investors and increasing liquidity in the local market.
According to Maait, the new sukuk bill is also a new financial tool that could help cover the budget deficit.
âThe government is doing its best to reduce the budget deficit, so this bill will generate income and raise capital without putting pressure on state coffers,â Maait said, adding that âthe proceeds of Sovereign bonds will be used to spend on development projects that can generate new employment opportunities and improve the lives of citizens.
President Gebaly said sovereign bonds are a source of funding, but they are different from treasury bills and bonds.
âAll of them can be traded on an exchange, but the yields on sukuk are much higher because they are high risk and do not have a fixed interest rate,â Gebaly said.
Gebaly revealed that the sovereign bond bill had obtained initial approval from the Islamic institution of Al-Azhar, the Central Bank of Egypt and the Financial Supervisory Authority.
Soliman Wahdan, parliamentary spokesperson for the Al-Wafd party, approved the bill, arguing that sovereign bonds are a new window to attract investment and raise the capital needed to close the budget deficit and spend on investment projects. development.
Ali Gomaa, head of the House’s religious affairs committee, said the new sovereign bond bill complies with Islamic Sharia law.
“He also obtained the approval of the major clerics of Al-Azhar after a four-month study of his articles,” Gomaa said.
MP Amr Darwish said sovereign bond markets are dominant in most Islamic countries.
“So there is no fear that Egypt will resort to this new financing tool which is in line with Islamic Sharia law,” Darwish said.
Ayman Abu El-Ela, parliamentary spokesperson for the Reform and Development Party, has proposed that the proceeds of sovereign bonds be tax exempt.
“Article 6 of the bill should be amended to exempt yields from sovereign bond transactions from taxes, which are currently imposed on government treasury bills,” Abu El-Ela said, adding that “the tax exemption will stimulate investors to tap this market. “
Abu El-Ela’s proposal was, however, rejected by Finance Minister Mohamed Maait, who insisted that “exempting the sukuk from taxes would deprive the government of billions of pounds of revenue.”
The bill was rejected by Modern Egypt Party spokesman Hehsam Hilal, who argued that the investment environment in Egypt is not yet favorable for this type of financial security.
Ahmed Samir, chairman of the economic affairs committee, said the new bill drafted by the government sets the legal framework for Egypt to enter the sovereign bond market for the first time.
âThe sukuk have become an internationally recognized tool for raising capital in global markets, so now is the time for Egypt to join these markets to generate money that can be used for development projects and programs. ‘investment,’ Samir said.
Samir said sukuk would be attractive because they are compliant with Islamic Sharia law.
âAs a result, investments in sovereign bonds are now everywhere in Islamic markets like Saudi Arabia, Malaysia, Indonesia, United Arab Emirates, Bahrain and Turkey, and they have generated up to 2,700 billion dollars in recent years, âSamir said.
Ahmed Diab, secretary general of the Economic Committee, said the capital generated by the sukuk could also be used by the finance ministry to improve the state’s financial performance and meet short- and long-term deficit coverage targets. budgetary.
A government explanatory report on the law said: âSovereign bonds are a new type of public financial securities that comply with Islamic Sharia law and aim to attract Egyptian and foreign investors, especially those who refrain from investing. in traditional financial and debt service securities. currently available on the market.
The report laments that “sovereign bonds are almost non-existent in the Egyptian market, although there is no reason not to exploit this area of ââinvestment as long as the economic environment is favorable and they can serve the markets. economic objectives of the state “.
Article three of the bill specifies that “sovereign bonds will be issued in the form of paper and electronic securities and under the conditions set by the regulations for the execution of the law”.
The Economic Commission has decreed that the regulations for the implementation of the bill will be published within three months from the date of application.
Article three also says that “sovereign bonds will be denominated in both Egyptian pounds and foreign currencies and in local and foreign markets.”
Article five states that a âwatchdog committeeâ made up of financial, economic, legal and Islamic Sharia experts will be responsible for overseeing the sovereign sukuk issuance process.
âThis committee will also oversee the management of sukuk in the market, starting with the issuance process and ending with the restoration of their value,â the article five said, adding that âthe committee will also be responsible for preparing a annual report on the sukuk. market. “
Article 6 stipulates that taxes levied on current financial securities shall also be levied on the products and income of sukuk.
Article 15 states that sovereign bonds can be issued by Egyptian stock companies.
The company, on behalf of the sukuk holders, will be authorized to track its investments and ensure that they are used in the correct channels.
The issued and paid-up capital of a sovereign bond company must not be less than one million Egyptian pounds.
Article 16 stipulates that the General Financial Control Authority will be responsible for the authorization of sovereign bond companies.
The Authority will also be responsible for preparing annual reports on the activities of sukuk companies for submission to the President of the Republic, the Prime Minister and the House of Representatives.