Sustainable development: Egypt raises $478 million on the Panda bond market

Egypt has just issued $478 million in sustainable Panda bonds. This transaction, partly guaranteed by the African Development Bank (AfDB) and the Asian Infrastructure Investment Bank (AIIB), will support sustainable development.

Egypt becomes the first African country to raise funds on the Panda bond market in China. The country of the pharaohs has just raised $478 million in a transaction denominated in Chinese yuan and partially guaranteed by the African Development Bank (AfDB) and the Asian Infrastructure Investment Bank (AIIB).

Panda bonds are issued on the Chinese capital market by foreigners, including governments and companies. This first issue by Egypt is “a historic step forward, not only for the country, but for the continent as a whole. We have paved the way for alternative and sustainable financing for our African neighbours, and we have deepened the partnership with our Chinese counterparts”, enthused Mohamed Maait, Egypt’s Minister of Finance.

A first for an African country

He added that “this is more than just a source of financing, it is a testimony to the importance of our economic and financial ties with the Chinese government”. Bank of China, one of the four largest commercial banks in China, acted as lead manager for the transaction, with the support of HSBC Bank (China) Company, a subsidiary of the British banking group HSBC.

The proceeds of the bond will support sustainable development through clean transport, renewable energy, energy efficiency, sustainable water and wastewater management, financing for micro, small and medium-sized enterprises (MSMEs), and essential health service initiatives, among others. According to the Egyptian authorities, these investments will be made within the sovereign sustainable financing framework launched ahead of COP27 in 2022.

Taking advantage of green bonds with the support of the AfDB

For the AfDB, Egypt, which is increasing its number of transactions on the green bond market, is acting as a trailblazer for other African countries that will be relying on Panda bonds in their development processes.  “This first Panda bond issue by an African sovereign is a perfect example of how the AfDB’s regional member countries can take advantage of the Bank’s AAA credit rating to penetrate new markets and mobilise sustainable financing on competitive terms from international investors,” explains Mohamed El Azizi, AfDB Director for North Africa.

The pan-African bank based in Abidjan, Ivory Coast, is also encouraging African countries to take advantage of the global green bond market, which passed the $2,500 billion mark in January 2023, according to the World Bank.