Egypt issues MENA-first sustainable panda bonds worth $500m
Egypt has achieved a significant milestone by becoming the first country in the Middle East and Africa to issue sustainable panda bonds in the Chinese financial market. These bonds, valued at around $500 million, will be allocated to finance projects that align with sustainable development goals.
Notably, these panda bonds come with a low interest rate of 3.5% annually for a three-year term, which is particularly attractive when compared to the rates offered by international dollar bond issues, especially in the face of global economic challenges. These bonds are further supported by credit guarantees from international development banks with strong credit ratings, including the Asian Infrastructure Investment Bank and the African Development Bank.
The Finance Ministry collaborated with these guarantors to navigate the preparatory procedures for launching panda bonds in the Chinese financial market, which stands as the world's second-largest financial market in terms of size. The objective behind this initiative is to diversify sources of financing and access new global markets.
Points clés à retenir
A panda bond is a bond denominated in renminbi (RMB) and issued in mainland China by a foreign entity, which can include national governments, local governments, multilateral development banks, regional development banks, or non-financial institutions. A green panda bond follows the same issuance framework but is distinguished by the "green" label. The proceeds from green panda bonds are specifically designated for financing environmentally friendly assets and projects. Issuers of green panda bonds are required to monitor and report on the utilization of funds to ensure compliance with China's green taxonomy and related regulations. It is often more suitable for regional and continental development banks, such as the African Development Bank (AfDB), the African Export-Import Bank, the Eastern and Southern African Trade and Development Bank, and the West African Development Bank, to issue panda bonds rather than African countries. This is because these development banks typically possess stronger credit ratings compared to some African countries that experienced significant sovereign credit rating downgrades recently. That adds more significance to Egypt's successful issuance. Leveraging green panda bonds can help African governments finance green and environmentally sustainable projects effectively.