Middle East

Egypt amending sovereign sukuk bill after controversy

A handout picture released by Egyptian Presidency shows Egypt's President Mohamed Mursi (R) meeting with the new governor of Egypt's central bank Hisham Ramez (L), the outgoing head of the bank Faruq el-Okda (2L) and Egyptian Prime Minister Hisham Qandil (2R) in Cairo on January 10, 2013. AFP PHOTO/HO/EGYPTIAN PRESIDENCY

CAIRO: Egyptian officials are revising a draft law that would allow the government to issue sukuk (Islamic bonds), after criticism by religious scholars, finance minister Al-Mursi Al-Sayed Hegazy said on Tuesday.

"Proposed amendments to the Islamic instruments bill that were mentioned by the Islamic Research Academy have been taken into account," he told Reuters after meeting with top officials of Egypt's prestigious Al-Azhar university at its headquarters.

The controversy over the sukuk bill illustrates how, in the wake of the uprising that ousted Hosni Mubarak in early 2011, ideological and religious issues - and suspicion of the government - continue to complicate the country's economic policy-making.

Egypt has never issued a sovereign sukuk. The government now wants to do so to help finance its budget deficit; an international issue would help it replenish dangerously low foreign reserves. The Muslim Brotherhood, which holds Egypt's presidency, also wants to promote sukuk for religious reasons.

But earlier this month the Islamic Research Academy, a group of scholars affiliated to Al-Azhar, 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 might allow authorities to abuse their control of public assets.

Prime Minister Hisham Qandil responded to the criticism by saying Egypt would not use the Suez Canal or other state facilities to back sukuk issues.

Hegazy said on Tuesday that the revised bill would soon be presented to Al-Azhar, but he declined to describe the revisions and it was not clear how the government could issue sukuk if it could not back them with state assets.

The minister did not say when he hoped the revised bill would become law. Elections to parliament are expected in April.





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