Dubai, United Arab Emirates (CNN)–Egypt has signed facilities worth 2 billion dollars to finance its financial needs, which include its environmentally friendly projects, or what is known as “green.”
The Ministry of Finance said in a statement that the signing included financing facilities for a term that comply with the principles of environmental, social and institutional governance (ESG) and other facilities that are compatible with Islamic law.
A tranche of the ESG will be used to finance green projects, and a tranche of Islamic finance will finance the general budget, according to the statement.
Muhammad Ali Yassin, chief executive officer of strategies and clients at Al Dhabi Capital, told CNN in Arabic: “They are government credit facilities that are not sukuk or green bonds.”
He added: “It is clear that today is in the process of accelerating to try to open credit lines or borrow by issuing bonds or sukuk in the current period before the end of the year, with the expectation of the “Tapering” operations that the US Federal Reserve will do in terms of starting to reduce bond purchases, which will have an impact, perhaps. The high prices of coupons that must be paid to issue such lines.”
He pointed out that the process of finding corners in the ways of borrowing has a positive role to attract new investors. “What is unique about this is that it is an ESG, Shariah compliant, an investment vehicle that is required of a certain type of investor under credit lines and not under a bond program…so in terms of time it is a little shorter than bonds.”
Green bonds, ESG compliant lines of credit and sukuk are financing solutions. Egypt’s commitment to sustainability is represented in rationalizing the use of water and investing in renewable energy, for example. The Saudi Electricity Company is one of the Arab companies that issued green bonds.