Egypt marks a historic move, issuing a RMB3.5 billion Sustainability Panda Bond, backed by African and Asian development banks.
Egypt has become the first nation on the African continent to issue a three-year Sustainability Panda Bond worth RMB3.5 billion ($478.7 million), tapping into hitherto untapped sources of funding to support economic growth.
Foreign issuers sell panda bonds on the Chinese domestic capital market. They are usually done in Chinese yuan and are issued by enterprises or governments. The African Development Bank and the Asian Infrastructure Development Bank’s partial loan guarantees to Egypt open up a route for other nations to take in order to gain access to China’s new debt capital markets, as more organisations search outside for potential new markets.
Moreover investors were attracted to the deal and favourable terms were obtained thanks to the joint guarantees of the two multilateral development banks with triple-A ratings. The Bank of China Limited served as the primary underwriter and bookrunner, with assistance from HSBC Bank (China) Company Limited.
“Egypt is the first African sovereign to issue Panda Sustainable Bonds in the Chinese Financial Markets,” stated Dr. Mohamed Maait, Egypt’s Minister of Finance. This is a momentous step for the continent as a whole, not just for the nation. We have strengthened our relationship with our Chinese colleagues and opened the door for alternative, sustainable financing for our neighbours in Africa. It serves as more than just a source of funding; rather, it is evidence of the significance of our financial and economic relations with the Chinese government.
Enduring financial commitment
Egypt introduced its Sovereign Sustainable Financing Framework in advance of COP27 with the goal of promoting sustainable development inside the nation. Investments in sustainable water and wastewater management, renewable energy, energy efficiency, and clean mobility are all guaranteed by the framework. This is on top of funding for key health services projects and micro, small, and medium-sized businesses, among other things.
Egypt will strive to further work towards accomplishing its green targets with the proceeds from the bond.
Moreover the African Development Bank’s director general for North Africa, Mohamed El Azizi, called the issuance revolutionary. “This is the ideal illustration of how member governments of the African Development Bank’s regional network may take advantage of the bank’s AAA credit rating to break into new markets—the first Panda bond issue by an African sovereign. Additionally, El Azizi stated, “they can now mobilise sustainable financing at competitive terms from international investors.”
Its entry into sustainable development is not its first
Egypt is no stranger to the sustainable bond market. It was the first nation in the Middle East and North Africa to issue green bonds in 2020. Moreover, it was the first nation in Africa and the Middle East to get access to Japanese capital markets in 2022. Finally it released a $500 million (approximately 60 billion Japanese yen) Samurai bond.
“Egypt’s Panda Bond transaction demonstrates our steadfast commitment to expanding the continent’s reach for large-scale sustainable financing.” It is quite tiny right now, according to Ahmed Attout, interim director of financial sector development at the African Development Bank. Egypt could be the first country in Africa to issue bonds on the Panda Bond Market, but it won’t be the last, he continued, since we’re prepared to help RMCs raise further development funding at scale on both domestic and global capital markets.
