Egypt’s senate approved Monday a draft law submitted by the government regarding the issuance of a sovereign Sukuk.
Speaker Abdel Wahab Abdel Razek chaired a plenary session during which the senate discussed the draft law which aims to improves the state’s financial performance and cover the budget deficit.
Senators welcomed the bill, stating that it will help bring in unconventional investments and preserve the state’s right to ownership of assets and the rights of investors all while complying with Islamic law.
A report prepared by the Senate's economic and financial affairs committee said the 24-article bill comes through creating new tools for covering the budget deficit, diversifying sources of finance, and stimulating demand on government-issued financial securities.
The sovereign bonds are a new kind of government financial securities that go in line with Islamic Sharia and aim to attract Egyptian and foreign investors who abstain from investing in traditional financial and debt servicing securities currently on the market, according to the report.
Youssef Amer, chair of the Senate Religious and Endowments Affairs Committee, said that the new law guarantees the right of ownership to the state, in accordance with Islamic Sharia.
Amer explained that the law encourages state-protected investment, helps establish development projects, and maximizes the national economy.
Representative Ahmed Diab, a member of the Senate Youth and Sports Committee, affirmed that the sovereign Sukuk is in compliance with the Islamic Sharia as one of the highly accepted financing instruments and approved in global financial markets.
Diab explained that introducing sovereign Sukuk in Egypt will attract new national and foreign investors who do not invest in the current government instruments, especially since the state depends on other financing tools, such as bonds and treasury bills which resulted in increasing debts.
The draft law regulates the authorities concerned with issuing the Sukuk, including their form and characteristics, the issuance formulas, and their compatibility with the provisions of Islamic Sharia.
It also details the authentication process and its circulation, the application of taxes to the Sukuk, ownership rights, and the obligations of the beneficiary.
According to Article (13) of the law, the Sukuk has a maturity of 30 years, however, it is permissible to reconstruct the bonds after the end of their original period for similar periods.