{"id":17075,"date":"2025-12-18T19:54:57","date_gmt":"2025-12-18T17:54:57","guid":{"rendered":"https:\/\/zawia3.com\/?p=17075"},"modified":"2026-10-07T16:15:36","modified_gmt":"2026-10-07T14:15:36","slug":"asset-sale-2","status":"publish","type":"post","link":"https:\/\/zawia3.com\/en\/asset-sale-2\/","title":{"rendered":"Egypt\u2019s Sovereign Sukuk: Reducing Debt or Mortgaging the Future?"},"content":{"rendered":"

Egypt has expanded its use of sovereign sukuk to diversify government borrowing and attract investors seeking Sharia-compliant instruments. The international programme announced in 2023 had a ceiling of $5 billion; that ceiling should not be confused with money actually raised. The documented issues comprised $1.5 billion in February 2023, $1 billion in June 2025 and $1.5 billion in October 2025\u2014a combined $4 billion. In November 2025, the Finance Ministry also launched a separate domestic issue worth EGP 3 billion under a local programme targeting EGP 200 billion.<\/p>\n

Under Law 138 of 2021<\/a>, sovereign sukuk are equal-value, tradable government securities issued for a specified period of no more than 30 years, representing undivided interests in the usufruct rights of assets. Unlike conventional interest-bearing bonds, their structure follows Sharia-compliant contracts. The law directs issue proceeds to investment and development projects included in the state\u2019s economic plan.<\/p>\n

Critics describe reliance on sukuk as a potential back door to disposing of state assets, because investors may obtain rights to benefit from them for decades. Allocating land at Ras Shukeir on the Red Sea prompted questions about the implications for strategic assets. Those concerns should be distinguished from the legal structure: granting usufruct rights does not itself transfer ownership of the underlying land, and default does not automatically mean that holders acquire it.<\/p>\n

The Finance Ministry said the land allocation was intended to support sovereign sukuk issuance and reduce debt, rather than sell the land or surrender ownership. It said ownership would remain with the state, represented by the ministry and other relevant public bodies.<\/p>\n

The ministry said part of the land would support partnerships with government agencies and economic authorities, replacing debt with joint investments in service, tourism and property projects. It argued that these projects would create jobs and improve returns to the state.<\/p>\n

\"Egyptian<\/figure>\n

On 4 November 2025, the ministry announced its first domestic sovereign sukuk issue through primary dealers: EGP 3 billion, with a three-year maturity. It said the sale would broaden funding sources, reduce financing costs, strengthen competition in the debt market and attract investors interested in Sharia-compliant government securities.<\/p>\n

Demand covered approximately five times the issue\u2019s value. The accepted average yield was 21.56%, about 0.26 percentage points below the previous week\u2019s indicative conventional bond yield of 21.82%. It was also 14.3 basis points below the 21.703% average accepted yield on comparable Treasury bonds issued on the same day. These are differences in percentage points or basis points, not proportional percentage reductions.<\/p>\n

The ministry said public auctions involved 16 primary-dealer banks and four Islamic banks: Faisal Islamic Bank, Abu Dhabi Islamic Bank, Al Baraka Bank and Kuwait Finance House. The EGP 200 billion domestic programme uses an ijara structure and provides the same tax and accounting treatment as Treasury bonds. Planned issues would be included in the ministry\u2019s quarterly issuance schedule.<\/p>\n

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Why expand sovereign sukuk?<\/h2>\n

Political economy professor Karim El-Omda describes sukuk as relatively new to Egypt\u2019s market, although they have been used elsewhere for many years. Like bonds, they finance the issuer, but their contractual structure complies with Islamic finance principles. Governments may issue sovereign sukuk, while private companies may issue their own instruments subject to the applicable rules.<\/p>\n

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\u201cSukuk are not sold by relinquishing a state-owned asset, but through an undivided interest in its usufruct rights or the return generated from it,\u201d El-Omda tells Zawia3. The state retains ownership, while investors receive a share of the return associated with the asset\u2019s operation.<\/p>\n<\/blockquote>\n

He describes the arrangement as participation in returns without surrendering ownership of the underlying asset. He says the statutory term cannot exceed 30 years and that sukuk appeal particularly to Arab and Gulf investors and institutions preferring Sharia-compliant finance. They are an internationally used funding tool, rather than a uniquely Egyptian mechanism.<\/p>\n

However, the scale of sukuk issuance remains small relative to Egypt\u2019s accumulated conventional loans and bonds. A few billion dollars of issues should be viewed alongside an external debt stock exceeding $160 billion. Their direct numerical effect on the overall debt burden therefore remains limited, despite their political and media prominence.<\/p>\n

Their significance goes beyond their size. Using public assets and usufruct rights to underpin financing changes the mix of borrowing instruments. It may diversify the investor base and reduce borrowing costs at the margin, but it does not by itself eliminate reliance on debt. Whether it improves sustainability depends on how the proceeds and underlying assets are used.<\/p>\n

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Debt absorbs public resources<\/h2>\n

Economist Elhami El-Merghany, deputy chair of the Socialist Popular Alliance Party, tells Zawia3 that Egypt faces an uncontrolled expansion of borrowing, which he believes occurs without adequate scrutiny or, at times, an objective justification. He places external debt above $165 billion and domestic debt above EGP 15 trillion, arguing that the resulting burden constrains public spending. These are his estimates; the Central Bank\u2019s report for the end of June 2025 records external debt at $161.2 billion.<\/p>\n

El-Merghany cites the 2025\/26 budget\u2019s EGP 2,298 billion interest bill and EGP 2,084.6 billion in principal repayments: EGP 4,382.6 billion combined. He calculates that debt payments absorb roughly 65% of total budget uses, leaving 35% for other uses. Principal repayments are part of total financing uses, rather than expenditure in the narrower budget definition.<\/p>\n

He also cites a revision to projected external debt service for 2026, from $27.87 billion to $29.18 billion, with principal repayments reaching $23.79 billion. In his account, successive revisions had raised the projection by approximately $4.5 billion. These figures are forecasts discussed at the time of the original December 2025 report, rather than payments already made in 2026.<\/p>\n

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El-Merghany warns that high domestic borrowing costs drain resources and encourage banks to buy government debt instead of financing development projects. In his view, each new addition to debt further restricts public and investment spending.<\/p>\n<\/blockquote>\n

He argues that expanding domestic borrowing risks increasing debt-service costs, narrowing development opportunities and weakening the ability to finance essential projects.<\/p>\n

External debt rose sharply over the preceding decade. Figures cited in the report put the stock at approximately $48 billion in June 2015, $55.8 billion in 2016, $82.8 billion in 2017, $96.6 billion in 2018, $106.2 billion in 2019 and $123.5 billion in 2020. Subsequent cited figures are $137.8 billion in 2021, $162.9 billion in 2022 and around $168 billion in 2023. These historical observations do not all use the same year-end reference date and should not be treated as a uniform annual series.<\/p>\n

The Central Bank\u2019s External Position report for 2024\/25<\/a> records $152.9 billion at the end of June 2024 and $161.2 billion at the end of June 2025, an increase of approximately $8.3 billion.<\/p>\n

\"External<\/figure>\n
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A cautious recovery<\/h2>\n

The sixth economic census, released in autumn 2025 by CAPMAS, provides a picture of the composition of activity and businesses in Egypt. But business counts alone cannot establish whether the economy has recovered. Growth, inflation, the budget deficit and sources of foreign exchange must also be examined.<\/p>\n

Growth improved in 2024\/25, while inflation eased from earlier peaks. CAPMAS recorded nationwide annual inflation of 10.1% in October 2025. Budget pressures, debt, trade imbalances and dependence on exceptional inflows, including Gulf investment and land deals, nevertheless raised questions about sustainability.<\/p>\n

In September 2025, the Planning Ministry announced real GDP growth of 4.4% for the 2024\/25 fiscal year, compared with 2.4% a year earlier. Fourth-quarter growth reached approximately 5%, the highest in three years, against 2.4% in the corresponding quarter of the previous year.<\/p>\n

Egypt\u2019s fiscal year runs from 1 July to 30 June. The ministry said annual growth exceeded its 4.2% target and reflected resilience to external shocks. It attributed the improvement to policies supporting macroeconomic stability, stronger investment-spending governance and a larger private-sector contribution under the national structural reform programme.<\/p>\n

Tourism, non-oil manufacturing, communications and information technology were important drivers. The ministry reported non-oil manufacturing growth of 18.8% in the fourth quarter, compared with 4.7% a year earlier, with gains of 126% in vehicles, 52% in pharmaceuticals and 41% in ready-made clothing.<\/p>\n

The sixth economic census recorded approximately 3.852 million privately owned establishments out of 3.858 million, or 99.85%. Public-sector and public-business-sector establishments accounted for 0.15%. These are shares of establishment counts: they do not mean that the public sector contributes only 0.15% of output, assets or economic value, nor do they establish improved productivity.<\/p>\n

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Economist Zohdy El-Shamy, chair of the Socialist Popular Alliance Party\u2019s board of trustees, says Egypt now faces an almost daily stream of privatisation and asset-sale news. \u201cCan that really represent a sound economic choice?\u201d he asks.<\/p>\n<\/blockquote>\n

El-Shamy argues that, after allowing external debt to reach around $150 billion and finding it harder to obtain new loans, the government turned to selling assets to meet its obligations. In his assessment, this deprives the state of future returns from profitable fertiliser companies, Abu Qir, MOPCO, Eastern Company, pharmaceutical businesses and banks. Foreign investors\u2019 ability to remit profits abroad may also increase foreign-exchange pressures, he says.<\/p>\n

He describes the policy as selling assets that belong to the public and sacrificing the interests of current and future generations. He believes the risks extend beyond economics to national security, particularly where ports and airports are involved.<\/p>\n

Taghreed Badr El-Din, an assistant lecturer in economics at Beni-Suef University\u2019s Faculty of Politics and Economics, offers a different assessment: a period of \u201ccautious recovery.\u201d Macroeconomic performance shows improvement in growth and monetary stability, she says, but deeper reforms are needed to sustain it.<\/p>\n

Speaking to Zawia3, she cites IMF estimates she dates to May 2025 that put growth at 4.3% in 2025, against 3% a year earlier. She also cites a World Bank forecast of 4.2% for 2025\/26 and 4.6% for the following fiscal year. She links the improvement to foreign investment in infrastructure and energy and the IMF-supported $8 billion programme. These are forecasts quoted by the interviewee in the original report\u2019s historical context, rather than current forecasts or realised outcomes.<\/p>\n

The census also showed that private establishments were predominantly small, with limited capital, including many operating in trade and retail. It recorded approximately 15.234 million workers in covered establishments, of whom 14.311 million, or 93.9%, worked in the private sector. That sector accounted for 80.2% of wages paid. These findings describe the census\u2019s covered establishments, rather than the entire workforce or all economic activity.<\/p>\n

Sovereign sukuk offer Egypt another way to diversify government financing and attract Sharia-compliant investment. Their contribution remains modest relative to the overall debt stock. Their value will depend on whether financing supports productive investment, manages risks associated with public assets and preserves state ownership and control over their use. They are a funding instrument\u2014not a comprehensive solution to the economy\u2019s structural problems.<\/p>\n","protected":false},"excerpt":{"rendered":"

Egypt expands sovereign sukuk to diversify borrowing, while economists debate debt costs, public asset rights and the limits of a cautious recovery.<\/p>\n","protected":false},"author":4,"featured_media":17077,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"footnotes":""},"categories":[409],"tags":[],"kateb":[6247],"class_list":["post-17075","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics-en","kateb-rasha-ammar"],"jetpack_featured_media_url":"https:\/\/zawia3.com\/wp-content\/uploads\/2026\/10\/asset-sale-2-2025-cover.png","_links":{"self":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/17075","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/comments?post=17075"}],"version-history":[{"count":3,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/17075\/revisions"}],"predecessor-version":[{"id":17090,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/posts\/17075\/revisions\/17090"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media\/17077"}],"wp:attachment":[{"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/media?parent=17075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/categories?post=17075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/tags?post=17075"},{"taxonomy":"kateb","embeddable":true,"href":"https:\/\/zawia3.com\/en\/wp-json\/wp\/v2\/kateb?post=17075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}