'Islamic' Bonds to Generate $10 Billion in Revenue

The new Islamic Bonds (Sukuk) law is expected to generate $10 billion for the Egyptian government, Finance Minister El-Morsi Hegazy was quoted as saying on Sunday. The minister indicated that "studies" show that the new bonds would generate such an amount without giving further details or specifying a timeline, according Reuters. Last week, Egypt's cabinet approved a draft law to allow sovereign Islamic bonds as the government searches for new ways to finance an unsustainable budget deficit.

The Islamist-led administration had amended the original draft of the law following criticism from religious scholars. The legislation still needs to be approved by the upper house of parliament, where Egypt's ruling Islamists hold a clear majority. "The government amended the recent controversial Islamic Bonds draft law to protect key state assets from being sold or mortgaged," Hegazy explained during the finance ministry’s press conference today.

Governmental sources have repeatedly claimed on several occasions that the draft law would not allow the use of strategic assets, such as the Suez Canal to back Islamic Bonds. Proponents say it would help finance the country's growing budget deficit. The sukuk is considered by some to be the first serious step to promote Islamic financial practices since President Mohamed Morsi – who hails from the Muslim Brotherhood - came to power.

Qatar boosts Egypt's economy:
Hegazy announced during the press conference that Qatar had already deposited a total amount of $5 billion in the Central Bank of Egypt, including $2 billion? to buy governmental bonds. Qatar's minister of foreign affairs announced during a visit last week that Qatar would increase its deposit in Egypt's central bank to $5 billion and support Egypt's economy with a $1 billion grant. Qatar's Minister of Finance Youssef Kamal met with the Egyptian government last week and announced that his government would invest in Islamic bonds if implemented in Egypt.

Egypt's IMF loan unconditioned:
Egypt's finance minister assured in the press conference Sunday morning that the $4.8 billion IMF loan comes without conditions and does not require austerity measures to be implemented or a special economic recovery programme, as has been the case with several European countries, namely Greece. The minister asserted that a series of modifications will be made to the government's "economic recovery programme" in the next period, including the postponement of a series of tax hikes, and stresses that such steps are necessary to support society's lower strata.

El Hegazy affirmed that the Egyptian government is the sole decision-maker when it comes to setting Egypt's economic policy and that the announced government's "economic recovery programme" was not tailored by the IMF. IMF head Christine Lagarde had announced Thursday that talks with Egypt were near completion and that a budget assessment was the final step before granting Egypt the loan.