Egypt forecasts economic growth of 5.4% in 2021/22

Egypt forecasts economic growth of 5.4% in 2021/22
Egypt forecasts economic growth of 5.4% in 2021/22

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Jeddah - Yasmine El Tohamy - LONDON: The British government has issued £500 million ($686.85 million) worth of Shariah-compliant sovereign bonds — seven years since it made history as the first country outside the Muslim world to issue a sovereign sukuk.

The Treasury said on Thursday that “£500 million of sukuk, the Islamic equivalent of a bond, has been sold to investors based in the UK and in the major hubs for Islamic finance in the Middle East and Asia.”

Chancellor of the Exchequer Rishi Sunak said: “We’ve set out ambitious plans to make the UK the most open and dynamic financial center in the world. By launching our second sovereign sukuk, we’re cementing the UK’s position as the leading global hub for Islamic finance outside of the Islamic world.”

He added: “Strong investor demand for this sukuk meant we achieved a good price for the taxpayer and will help us develop our relationships with Islamic economies around the world.”

The Treasury said the issuance “attracted high-quality global demand,” with orders totaling in excess of £625 million.

Britain has long held a strong position in the world of Islamic finance. In 2014, it made history as the first country outside the Muslim world to issue a sovereign sukuk, worth £200 million. 

Thursday’s sukuk issuance “highlights London’s role as a global leader in Islamic finance. The UK has always been a strong supporter of the industry, and has had a long and committed focus going back to the 1980s,” Samina Akram, managing director of Islamic finance firm Samak Ethical Finance, told Arab News.

“The fact that the UK government’s timing of the sukuk announcement comes during a struggling economic climate further shows the seriousness of their commitment,” she added.

“Investors placed £2.3 billion of orders for the first UK sovereign sukuk issued in June 2014, 11 times the amount on offer. I have no doubt today’s issuance will also attract a surging demand.”

Bashar Al-Natoor, head of Islamic finance at Fitch Ratings, told Arab News that the £500 million issuance is also a “strategic” move — not one aimed entirely at plugging the government’s swelling coronavirus-induced debt.

He said: “They’re not doing it as a funding tool. They have other objectives in mind: They want to maintain their status as a Western hub for Islamic finance, including sukuk. London is one of the largest hubs for issuing sukuk, and this is more important in these times because of Brexit.”

He added: “Other countries, such as Ireland and Luxembourg, are eyeing the status of Islamic finance hub in the Western world — the UK is looking at it from this angle.”

Competition between these locations is already underway, said Al-Natoor. “Ireland is already working on their Islamic finance offering, and Luxembourg has very advanced infrastructure, mainly toward Islamic fund management. You have these two that are visible when it comes to Islamic finance,” he added. “The UK has a head start in the field, but is there competition? I think yes, there is.”

With this second sovereign sukuk offering, Al-Natoor said, “they’re testing the waters of the market.”

He predicted that the government will closely assess the success of this offering, and it may dictate whether or not sukuk plays a greater role in the future of British finances. “It’s definitely a development worth watching,” he said.

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