Egypt issues first African sustainable Panda Bond worth 3.5 RMB with support from AfDB,AIIB

Business a.m

Egypt has issued its first Sustainability Panda Bond worth RMB 3.5 billion, making it the first African country to do so. The 3-year bond will help the North African nation access capital to drive economic growth. The move reinforces the country’s commitment to tapping new sources of funding.

The African Development Bank (AfDB) and the Asian Infrastructure Development Bank (AIIB) provided partial credit guarantees to support Egypt’s issuance of a Sustainability Panda Bond, making it easier for other African countries to tap into the growing Chinese debt capital markets. Panda bonds are issued by foreign issuers, typically governments or corporations, and denominated in Chinese yuan. This makes them an attractive option for African countries looking to finance their development needs.

The African Development Bank and the Asian Infrastructure Development Bank’s combined guarantees, with their triple-A ratings, attracted investors and secured competitive terms for the transaction. Bank of China Limited and HSBC Bank (China) Company Limited, as lead underwriter and bookrunner, were instrumental in the successful completion of the bond issue.

The bond proceeds will be used to support Egypt’s sustainable development efforts under its Sovereign Sustainable Financing Framework. The Framework focuses on areas such as clean transportation, renewable energy, energy efficiency, sustainable water and wastewater management, micro, small and medium-sized enterprises, and essential health services. These initiatives will help Egypt to achieve its climate and environmental goals while also creating economic opportunities for its citizens.

Mohamed Maait, Egypt’s minister of finance,called the Panda Bond issuance a “historical move” for the country and the entire continent. He said the issuance would pave the way for sustainable financing in Africa and deepen Egypt’s partnership with China. Maait also highlighted the importance of the economic and financial ties between the two countries.

Mohamed El Azizi, director general for North Africa at the African Development Bank, described Egypt’s Panda Bond issuance as groundbreaking. He noted that the African Development Bank’s AAA credit rating is a valuable resource that can be leveraged by Regional Member Countries to access new markets and raise sustainable financing at competitive rates.

Egypt has previously tapped sustainable bond markets to raise funds for green projects. In 2020, it became the first country in the Middle East and North Africa to issue a green bond. In 2022, it issued a Samurai bond worth about $500 million, making it the first African and Middle Eastern country to access Japanese capital markets.

This Panda Bond issuance demonstrates Egypt’s and the African Development Bank’s commitment to expanding access to sustainable financing in Africa, which is still lagging. The Bank’s Financial Sector Development team is ready to support other countries in accessing capital markets for sustainable financing.

“Egypt’s Panda Bond transaction is a testament to the African Development Bank’s commitment to increasing access to sustainable financing in Africa, which is still relatively low,” said Ahmed Attout, acting director of the bank’s financial sector development department. “While Egypt is the first African country to issue Panda Bonds, it will not be the last. We stand ready to support other countries to mobilize development financing from both local and international capital markets,” he added.