Egypt’s $1 Billion Sukuk: New Money or a Way to Restructure Debt?
Egypt has returned to international markets by issuing $1 billion in sukuk (Islamic bonds). This is the country’s second sukuk offering as it works to raise money in new ways and lower its foreign debt.
Details of the Sukuk
This sukuk will last for three years and pays an annual return of 7.875%. It’s part of a $5 billion plan to attract different investors and reduce borrowing costs. Kuwait Finance House bought the entire $1 billion offering.
The Finance Ministry says it wants to reduce Egypt’s external debt by $1–2 billion in 2025. To help with this, President Abdel Fattah el-Sisi gave over 174 square kilometers of state land in the Red Sea region to the ministry for sukuk-backed deals.
Foreign Investment Grows
Egypt has long faced a shortage of foreign currency. To fix this, it’s been trying to attract more foreign investment. These efforts are working. In 2024, Egypt was the top Arab country for foreign investment and ranked ninth globally, bringing in $47 billion. A major part of this came from a $35 billion deal with the UAE to develop Ras El Hekma on the Mediterranean coast. In return, the UAE converted $11 billion in deposits into investments.
In April 2025, Egypt also signed a deal with Qatar for up to $7.5 billion in new investments.
Using Land to Cut Debt
The Red Sea land will not be sold. Instead, it will be developed and used as collateral for sukuk. Some land will also be used in partnerships to turn government debt into investments.
The plan aims to reduce debt, lower repayment costs, and turn unused land into useful projects, such as real estate or tourism, which can also create jobs.
Deputy Finance Minister Ahmed Kouchouk said Egypt plans to issue $2 billion in sukuk in 2025. These steps are part of an economic reform plan backed by the IMF, which includes an $8 billion loan to stabilize the economy and support private businesses.
As of June 25, Egypt owes the IMF $10.3 billion, making it the third-largest borrower after Ukraine and Argentina.
Experts: It’s Debt Restructuring
Economist Abdel Nabi Abdel Motaleb told Forbes Middle East that using land for sukuk is an early step in restructuring Egypt’s debt. However, he’s unsure how the plan will work and worries about Egypt’s ability to repay since its earnings in US dollars are low.
He pointed out that this sukuk strategy is different from the UAE’s Ras El Hekma deal, where debt was canceled and direct investment was made. In this case, investors get bonds backed by land, not immediate returns.
He also said Egypt could have just sold the land to investors for hard currency to pay off existing debt.
Rising Debt and Costs
Egypt’s government debt was $260.4 billion in June 2024, up from $314.7 billion in 2020 in local currency terms—but this drop in dollar terms is due to the Egyptian pound losing value.
The average time to repay debt rose to 3.46 years in 2024, compared to 2.8 years in 2018. Government debt also increased, reaching 90.9% of GDP in 2024, up from 86.2% in 2020.
Debt service costs (interest payments) hit $7.52 billion in 2022/2023 before dropping to $3.79 billion in 2023/2024.
Land-Backed Sukuk Seen as Positive Step
Economist Hany Tawfik agreed that this is a form of debt restructuring. However, he said backing bonds with land improves Egypt’s chances of getting good financing, especially with its low credit rating. If Egypt defaults, investors could recover money by selling the land.
He also noted that offering land for development is common worldwide. Egypt’s government may create a detailed plan for the land and offer it to serious investors.
Egypt’s total external debt slightly decreased to $155.1 billion in the second quarter of the current fiscal year, but it’s still higher than the previous year.
Published: 3rd July 2025
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