Tunisia OKs Islamic sukuk bond issues

LONDON - Reuters

Tunisia’s parliament has passed a law 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, which have fallen to critically low levels.

Finance Minister Elyess Fakhfakh told parliament that his ministry planned sometime in November or December to issue a sovereign sukuk to raise $700 million. The government, led by moderate Islamists, is keen to develop Islamic finance, which was neglected by the autocratic secular regime for ideological reasons before the 2011 revolution. A Tunisian sukuk issue could potentially attract large amounts of Islamic-oriented funds from the wealthy Gulf.

The bill received 102 votes in favour in the vote in parliament, held ina closed session late on July 17. “Tunisia’s financial difficulties require the mobilisation of all resources, including Islamic sukuk,” Fakhfakh said.

Tunisia is running a large state budget deficit, which it has projected at about $3.2 billion this year, and political tensions are hurting its ability to finance itself.

The assassination of opposition figure Shukri Belaïd in February sparked the worst political crisis since Zine al-Abidine Ben Ali was toppled as president more than two years ago. The crisis ended with the resignation of the government and the formation of a new one headed by the Islamist Ali Larayedh.

Tunisia, which has also signed a $1.7 billion standby loan agreement with the IMF, is struggling with rising inflation and a big external deficit.