Egypt embarks on string of projects to be financed via green bonds

Egypt’s Ministry of Finance has listing Egyptian's first green bonds, intended to diversify government debt instruments and attract new investors.

al-monitor This picture taken on April 29, 2018, shows the Heliopolis metro station under construction in the Egyptian capital Cairo. Photo by KHALED DESOUKI/AFP via Getty Images.

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bonds, infrastructure, foreign investors, foreign investment, egyptian economy, environment, green energy

Oct 31, 2020

CAIRO — Egypt’s Finance Ministry listed the first green sovereign bonds issued by Egypt on the London Stock Exchange, worth $750 million, on Oct. 15. 

The Sept. 30 issuance of green sovereign bonds was a first in the Middle East and North Africa. Egypt’s Finance Minister Mohamed Maait said the issuance of the five-year bonds had attracted investments from Europe (47%), the United States (41%), East Asia (6%) and the Middle East (6%).

“We are pleased to join the group of sovereign green bond issuers that play a leading role in green development,” Maait said.

He added that the proceeds of green bonds will be used for clean transportation, renewable energy, pollution reduction, energy efficiency and sustainable management of water and sanitation.

In a Sept. 28 press statement, Maait said Egypt has “a portfolio of eligible green projects worth $1.9 billion, of which 16% is dedicated to renewable energy, 19% for clean transportation, 26% for sustainable water and sanitation management and 39% for reducing and controlling pollution.”

On Oct. 18, Minister of Environment Yasmine Fouad said that the Finance and Environment Ministries had prepared a short list of green projects to be funded through the first green bond offering. They include five projects worth $500 million in the fields of sustainable transportation, sustainable management of water and sanitation. The projects include a monorail connecting the new administrative capital to 6th of October City, a water treatment plant in the Arab al-Madabegh area, a Dabaa water desalination plant, a sewage treatment plant east of Alexandria and water treatment at the Ayyat Center in Giza.

On Aug. 5, 2019, the National Authority for Tunnels signed an agreement with Bombardier Transportation, the Arab Contractors and Orascom Construction for the design, construction, operation and maintenance of the monorail projects worth $4.5 billion.

In an Oct. 20 statement, Fouad said other projects have yet to be chosen for funding with the remaining $250 million. 

Mostafa Badra, a professor of finance and investment at Cairo University, told Al-Monitor that Egypt has long sought to attract investors and send a message that Egypt enjoys political and economic stability. He said that listing the green bonds is part of an effort to diversify government debt and attract a new set of investors with different orientations. 

On July 18, 2018, the Egyptian Financial Regulatory Authority’s board of directors approved a new article for the Capital Market Law no. 95 of 1992, to regulate the issuing of green bonds and define their concepts, types and areas of use in financing eco-friendly projects.

On Nov. 26, 2018, Egypt's prime minister approved amendments to provisions of the executive regulations of the Capital Market Law, to increase the efficiency and depth of the Egyptian capital market by introducing new financial instruments to attract investments.

On Dec. 10, 2019, Maait said in a press interview that political stability in Egypt and the ensuing stable monetary and financial policies all help attract investors and called on more investors to explore Egypt.

Badra said that it is only natural for the government to prioritize water projects in the offering of green bonds, in light of the challenges of the Grand Ethiopian Renaissance Dam crisis and general water scarcity. Led by President Abdel Fattah al-Sisi, the government has put forward projects for desalination and the treatment and management of rainwater and sewage. it has increased penalties for water waste to face potential water deficits. 

Sisi said in a July 28 speech at the opening of the Robbiki Industrial City that the state is seeking to save “every drop of water” through modern irrigation projects with investments worth 1 trillion Egyptian pounds ($62.5 billion). 

During his meeting July 23 with the ministers of irrigation, housing and agriculture, Prime Minister Mostafa Madbouly talked about the expansion and establishment of desalination plants as well as water treatment plants in coastal governorates. He stressed the need to impose harsher fines for wasting water and for illegal tapping into water networks. 

Abdel-Rahman Taha, a professor of economics at Cairo University, told Al-Monitor that Egypt has turned to green bonds for two reasons. First, the country is in dire need of financing eco-friendly projects such as electrical transportation to reduce exorbitant fuel consumption bills and air pollution. Second, Egypt needs to reassure foreign investors that the country is safe for such undertakings after measures to curb the pandemic caused the economy to deteriorate.

On Oct. 21, Transport Minister Lieut. Gen. Kamel al-Wazir told the Council of Arab Ministers of Transport that several metro construction projects were planned through 2024, at a cost of 512 billion Egyptian pounds ($32.5 billion). 

On March 24, Egypt imposed a nationwide lockdown to curb the spread of COVID-19, including curfews, bans on large public gatherings and the closure of restaurants, theaters and cinemas. Most of these measures were lifted on June 23 in an effort to restart the economy.

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