CAIRO: Egypt will not use the Suez Canal or other state assets to back issues of Islamic bonds, Prime Minister Hisham Qandil said in the wake of a controversy over a draft law that would allow the government to issue sovereign sukuk.
"The bill excludes public assets such as the Suez Canal and public facilities from being used for the issuance of instruments," Qandil said on his official Facebook page late on Wednesday.
Last week the Islamic Research Academy, a group of scholars affiliated to Egypt's prestigious Al-Azhar university, expressed reservations about the bill, including an article which it said would let the government lease out assets for up to 60 years.
Because Islam bans interest payments, sukuk must be backed by specific assets and pay investors with revenue from those assets. But the Islamic Research Academy said the bill could allow authorities to abuse their control of public assets.
Qandil said on Wednesday that a committee had been asked by the government to discuss the issue and would hold "a dialogue with all parties concerned".
The bill was presented under former finance minister Mumtaaz Al-Saeed. On Sunday the government appointed a new finance minister, Al-Mursi Al-Sayed Hegazy, who is an expert on public finance and Islamic economics.
The Shura Council, a government advisory body, is expected next week to discuss new proposals for the bill from the Freedom and Justice Party, an arm of President Mohamed Mursi's Muslim Brotherhood.
Saddled with a big budget deficit and declining foreign currency reserves, the government is eager to find ways to raise money and has been considering how to make Egypt's first international issue of sovereign sukuk.
The Muslim Brotherhood wants to promote sukuk in Egypt partly for religious reasons. But the controversy over the bill shows creating the necessary legal framework may not be a quick and easy process.
Ashraf el-Sharkawy, chairman of the Egyptian Financial Services Authority, told Reuters on Monday that the authority had sent a separate bill that would let private companies issue sukuk to the Ministry of Investment, in preparation for submitting it to parliament. Elections to parliament are expected in April.