Markets

Egypt issues $500m of green panda bonds in China

October 17, 2023

Mohamed Maait, Egypt's finance minister, at an IMF/World Bank meeting in Marrakech on October 13. He said Cairo's panda bonds had a low interest rate of 3.5% — Finance Minister Mohamed Maait said the IMF will release the first tranche after its board approves the expanded facility

Egypt is first Mena nation to take step
Cairo keen to diversify, says finance minister
Projects funded will support climate goals

Egypt issued $500 million of sustainable panda bonds on the Chinese financial market on Tuesday, becoming the first country from the Middle East and North Africa to do so.

The panda bonds – securities denominated in yuan but issued by non-Chinese borrowers – will be used to finance projects that support sustainable development goals, in line with Egypt’s National Climate Change Strategy 2050.

Mohamed Maait, Egypt’s finance minister, said the bonds carried a low annual interest rate of 3.5 percent over three years and were part of government efforts to diversify financing sources.

The government’s international bonds, which are denominated in dollars, fell by nearly 3 cents on October 8, reaching their lowest levels since May. A rebound followed, leaving most of the bonds down between 0.2 and 0.5 cents.

The fall came in the wake of the decision by Moody’s to downgrade Egypt’s credit rating to “Caa1” from “B3” – seven rungs into junk territory.

The ratings agency said its decision was based on the country’s worsening debt affordability.

The downgrade is expected to make it tougher to attract cash into Egypt in the short term, according to economists.

Cairo’s sustainable panda bonds are backed by a credit guarantee from international development banks, such as the Asian Infrastructure Investment Bank and the African Development Bank.

Maait said the bonds also served as a new gateway for increasing co-operation between Egypt and China.

Data from the Central Bank of Egypt shows that China acquired the largest share of Egypt’s imports, at a rate of 10.1 percent – roughly $2 billion – in the Egyptian fiscal year from July 2022 to June 2023.

China was Egypt’s second largest trading partner after the UAE. The US was in third place.

Beijing’s ambassador to Cairo, Liao Liqiang, has said that China’s Belt and Road Initiative is closely linked to Egypt’s Vision 2030.