In a groundbreaking financial maneuver, Egypt has achieved a significant milestone by successfully issuing a 3-year Sustainability Panda Bond valued at RMB 3.5 billion (equivalent to $478.7 million). This historic endeavor marks the North African nation as the first on the African continent to venture into the Chinese debt capital market via Panda bonds. This move underlines Egypt’s firm commitment to unlocking new avenues of capital to fuel its economic growth.
To make this landmark issuance possible, the African Development Bank and the Asian Infrastructure Development Bank stepped in with partial credit guarantees, setting a precedent for other African countries to access China’s rapidly growing debt capital markets. Panda bonds, typically issued by foreign entities, whether governments or corporations, are denominated in Chinese yuan and transacted in China’s domestic capital market.
The collaboration of these two multilateral development banks, both boasting triple-A ratings, played a pivotal role in attracting investors and securing highly competitive terms for this financial transaction. The Bank of China Limited, with substantial support from HSBC Bank (China) Company Limited, played the central role as the lead underwriter and bookrunner in this historic issuance.
The proceeds from this groundbreaking Panda Bond issuance will be utilized by Egypt to support inclusive growth and green initiatives outlined in its Sovereign Sustainable Financing Framework. This framework, unveiled before the COP27 climate conference held in Egypt last year, focuses on sustainable development through investments in areas such as clean transportation, renewable energy, energy efficiency, sustainable water and wastewater management, financing for micro, small, and medium-sized enterprises, and vital health service initiatives, among others.
Egypt’s Minister of Finance, Dr. Mohamed Maait, emphasized the significance of this achievement, stating, “Egypt is the first African sovereign to issue Panda Sustainable Bonds in the Chinese Financial Markets. This is a historical move not just for the country but for the entire continent. We have paved the way for alternate, sustainable financing for our African neighbors and have deepened the partnership with our Chinese counterparts. It’s more than just a financing source; it’s a testimony of how important our economic and financial ties are with the Government of China.”
Describing the issuance as groundbreaking, Mohamed El Azizi, African Development Bank Director General for North Africa, noted, “This first Panda bond issuance by an African sovereign is the perfect example of how African Development Bank Regional Member countries could leverage the Bank’s AAA credit rating to penetrate new markets and mobilize sustainable financing at competitive terms from international investors.”
This isn’t the first time Egypt has ventured into sustainable bond markets. In 2020, the nation became the first in the Middle East/North Africa region to issue a green bond. In 2022, Egypt was the first African and Middle Eastern country to access Japanese capital markets by issuing a Samurai bond worth 60 billion Japanese yen, approximately $500 million.
Ahmed Attout, African Development Bank Acting Director for Financial Sector Development, emphasized the significance of Egypt’s Panda Bond transaction, saying, “Egypt’s Panda Bond transaction shows our unwavering commitment to deepen the continent’s access to sustainable financing at scale, which to date is very small. While Egypt may be the first African nation to issue on the Panda Bond Market, it won’t be the last, as we stand ready to support RMCs to mobilize new development financing at scale on both local and international capital markets.”
Egypt’s Sovereign Sustainable Financing Framework aligns with the African Development Bank Group’s country strategy for Egypt and its High-5 operational priorities, making this achievement a significant step forward in the pursuit of sustainable economic growth and development on the African continent.
Photo (By Rupa Burman Roy)
October 17, 2023
Delino Gayweh
Serrari Financial Analyst
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