Egypt has successfully issued a three-year sustainability Panda bond worth 3.5 billion yuan (US$478.7 million), becoming the first North African nation to do so, as part of its efforts to access previously untapped sources of capital to drive economic growth.
The deal, announced on October 17, was launched on the back of partial credit guarantees provided by the African Development Bank (AfDB) and the Asian Infrastructure Investment Bank (AIIB), paving the way for other African countries to access the Chinese debt capital markets. Panda bonds are issued in China's domestic capital market by foreign issuers, typically governments or corporations, and are denominated in renminbi.
The combined guarantees from the two multilateral development banks with triple-A ratings helped crowd in investors and secured competitive terms for the transaction. Bank of China, with support from HSBC Bank (China), was the lead underwriter and bookrunner.
Egypt will use the bond proceeds for inclusive growth and green objectives under its sovereign sustainable financing framework. The framework, which was launched ahead of the COP27 climate conference held in Egypt last year, targets sustainable development through investments in clean transportation, renewable energy, energy efficiency, sustainable water and wastewater management, financing for micro, small, and medium-sized enterprises, and essential health services initiatives, among others.
Finance minister Mohamed Maait describes the Panda bond issuance as 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,” he says. “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.”
AfDB director-general for North Africa Mohamed El Azizi sees 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 and mobilize sustainable financing at competitive terms from international investors,” he says.
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. In 2022, it was the first country in the region to access the Japanese capital markets, issuing a Samurai bond amounting to 60 billion yen (US$500 million).
“Egypt’s Panda bond transaction shows our unwavering commitment to deepen the continent’s access to sustainable financing at scale, which to date is very small,” adds Ahmed Attout, AfDB 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 regional member countries to mobilize new development financing at scale on both local and international capital markets.”
The country's sovereign sustainable financing framework aligns with the AfDB Group’s country strategy for Egypt as well as the bank's "High 5s" priority areas for economic development, namely electricity and energy, food, industrialization, integration, and improvement of the quality of life in Africa.