Accessing previously untapped sources of capital to drive economic growth, Egypt has become the first country on the African continent to issue a three year Sustainability Panda Bond worth RMB3.5billion ($478.7million).
Panda bonds are issued in China’s domestic capital market by foreign issuers. Typically, they are done so by governments or corporations and are denominated in Chinese yuan. As organisations look abroad at the possibility of new markets, the African Development Bank and the Asian Infrastructure Development Bank providing partial credit guarantees to Egypt creates a path that other countries can follow to access new debt capital markets in China.
The combined guarantees from the two multilateral development banks with triple-A ratings helped crowd in investors and secured competitive terms for the transaction. The Bank of China Limited, with support from HSBC Bank (China) Company Limited, was the lead underwriter and bookrunner.
Egypt’s Minister of Finance, Dr. Mohamed Maait, said: “Egypt is the first African sovereign to issue Panda Sustainable Bonds in the Chinese Financial Markets. This is a historical move not just for the country but for the entire continent. We have paved the way for alternate, sustainable financing for our African neighbours and have deepened the partnership with our Chinese counterparts. It’s more than just a financing source; it’s a testimony of how important our economic and financial ties are with the Government of China.”
Sustainable investment
Ahead of COP27, Egypt launched its Sovereign Sustainable Financing Framework to target sustainable development in the country. The framework ensures that investments are being made in clean
transportation, renewable energy, energy efficiency, and sustainable water and wastewater management. This is in addition to financing for micro, small, and medium-sized enterprises, and essential health services initiatives, among others.
Using the bond proceeds, Egypt will look to further work towards achieving its green objectives.
Mohamed El Azizi, African Development Bank director general for North Africa, described the issuance as ground-breaking. “This first Panda bond issuance by an African sovereign is the perfect example of how African Development Bank Regional Member countries could leverage the Bank’s AAA credit rating to penetrate new markets. Also, they can now mobilise sustainable financing at competitive terms from international investors,” El Azizi said.
Not its first foray into sustainable development
Egypt has previous experience tapping sustainable bond markets. In 2020, it became the first country in the Middle East/North Africa region to issue a green bond. Furthermore, in 2022, it was the first African and Middle East country to access Japanese capital markets. It issued a Samurai bond of 60 billion Japanese yen (about $500 million).
“Egypt’s Panda Bond transaction shows our unwavering commitment to deepen the continent’s access to sustainable financing at scale. Currently, it is very small,” said Ahmed Attout, African Development Bank acting director for financial sector development. “While Egypt may be the first African nation to issue on the Panda Bond Market, it won’t be the last, as we stand ready to support RMCs to mobilise new development financing at scale on both local and international capital markets,” he added.
Francis Bignell
