Disputes and controversy in parliament over Sovereign Sukuk Law

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There have been disputes between the deputies rejecting and others supporting the Sovereign Sukuk Bill in the parliament’s plenary session.

The Egyptian government hastily prepared the law project to quickly enter the Islamic finance world, as the regime needs funds. By issuing debt instruments, the government is seeking to finance some troubled projects such as the new administrative capital and offer state assets to creditors under the usufruct system for a period of 30 years.

Hesham Helal, a representative of the Modern Egypt Party, announced his rejection of the bill, considering that the investment environment in Egypt may not be conducive to offering this type of Sukuk. Representative Diaa Daoud affirmed his rejection of the draft law on principle, warning the government against offering assets such as the Suez Canal to Arab and foreign investors.

Representative Mahmoud Badr, a member of the House of Representatives for the Coordination of Youth Parties and Politicians, rejected the Sovereign Instruments Bill. Badr said angrily: “Unfortunately, the Ministry of Finance, instead of looking for real alternatives to attract investments and achieve development, preferred increasing the debts of the Egyptians.” Badr pointed out that the government did not explain how it will cover these bonds. If the government is unable to pay, we would be facing a new increase in domestic debt.

By issuing sovereign Sukuk, the government aims to attract new Arab and foreign investors, who prefer Sharia-compliant transactions and are reluctant to invest their money in the known types. Sukuk differs from other government securities such as bonds and treasury bills in that they are subject to speculation and are subject to losses or profits.

Finance Minister Mohamed Maait defended the law, claiming that it aims to achieve growth for projects that need financing within the framework of the government’s diversification of debt instruments and the search for new investors to pump more money into the market. Egypt’s external debt rose to $129.2 billion at the end of last December, registering an increase of 14.7 per cent annually, as it recorded about $112.67 billion in December 2019.