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Chinese panda bonds present opportunity for cash-strapped Egypt

With this agreement with the African Development Bank, Egypt is the first African country to issue bonds in Chinese currency that are placed in the domestic market of mainland China.
Egypt's President Abdel Fattah al-Sisi (L) greets Chinese President Xi Jinping (R) during a signing ceremony at the Great Hall of the People on December 23, 2014 in Beijing, China.

In the last couple of years, financial news about Egypt has mainly focused on the country’s economic crisis, mounting debt and subsequent IMF bailout. However, there was some more positive news in May: The African Development Bank approved a Partial Credit Guarantee (PCG) equivalent to $345 million in renminbi as Egypt accessed the Panda bond market for the first time to finance green and social development projects.

The Abidjan-based multilateral development bank said that the PCG will allow Egypt to raise the equivalent of $500 million in the panda bond market, in which a non-Chinese entity issues bonds in Chinese currency that are placed in the domestic market of mainland China. It is often seen as an attractive funding source to businesses and sovereigns looking to diversify their funding and access low-cost capital. In 2022, the market was worth around $21 trillion but the demand for overseas yuan funding is growing.

Egypt’s fundraising also marks the first time an African country has accessed this lucrative market.

Abdourahmane Diaw, country manager for Egypt at the African Development Bank, told Al-Monitor the move will prove beneficial. “The panda bond issuance and related PCG will help Egypt diversify its funding sources, take advantage of better market conditions and develop long-term relationships with local Chinese and international institutional investors in the Chinese panda bond market,” Diaw said.

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