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Friday, October 09, 2020/ 02:20PM / United Capital Research /
Header Image Credit: Brand Spur
At the end of September
2020, the government of Egypt recorded a first, not only in Africa but also in Middle
East (the two regions that the country bridges) as it successfully tapped the
international debt capital market to issue a USD-denominated sovereign Green
Bond. According to statement from the Egyptian Ministry of Finance, orders
worth five times the $750 million raised, turned up for the five-year note and
allowed the government to issue at a lower yield of 5.25% (vs. initial target
of 5.75%).
Notably, the bond forms
part of Egypt's strategy to lock-in new financing sources and broaden the
country's investor base, steps that could in turn help lower its borrowing
costs. Specifically, the $750 million raised, plus that from future planned
green issuance, will contribute directly to the financing of $1.95 billion of
public investment projects tagged as green by the government. Also, the
Green-note issuance follows the country's historic $5.0bn Eurobond issued in
May 2020, that helped Egypt finance its Covid-19 response.
In all, we believe the
success of Egypt's green bond will open further opportunity for other African
countries to explore innovative issuances such as this. However, we note that
the success of Egypt's issuance can be tied to the government's clear intention
to improve environmental outcomes as well as the country's good economic policy
record and IMF-anchored reforms over the past few years. Already, the Nigerian
government have issued green bond in the domestic market and current reforms
going on within the country further strengthens the investment case for an
international green bond.
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