The Egyptian government approved a draft law on Wednesday that will allow the state to issue Islamic bonds, or sukuk, a move that could help narrow a gaping budget deficit and boost foreign currency reserves that have fallen to critically low levels.
Finance Minister Al-Morsi Al-Sayed Hegazi said Egypt could raise around $10 billion a year from the sukuk market - much more than some analysts expect - but added that it would take at least three months to push through the necessary regulations.
Shaped by Egypt's first Islamist-led administration, the law will also allow private borrowers to issue sukuk. Egypt has never before issued bonds that adhere to Islamic principles, under which the payment of interest is impermissible.
The law will be referred to the Islamist-dominated upper house of parliament before final approval from President Mohamed Morsi. An earlier version of the sukuk law had been criticised by Islamic scholars, forcing a rethink.
With the Morsi administration facing a deep economic crisis, the issuance of Islamic bonds could provide some financial support as parliamentary elections approach. The voting is set to begin in late April and stretch into late June.
