Yemen says to delay debut sukuk issue until 2011
Deputy finmin says security fears hurting investment.
November 3, 2010 4:23 by Reuters
Yemen will delay issuing its first Islamic bonds until the first quarter of next year to give it more time to iron out technical aspects of the sale, deputy finance minister Jalal Yaqoub told Reuters in an interview.
Yaqoub also said that security fears this year had dampened investor appetite for Yemeni assets.
The bond issue — intended to raise up to $300 million — has already been postponed once, to the end of this year from the third quarter. Yaqoub said the sale would be held up while Yemen worked out which collateral would underpin the sale.
“It’s a new experience for us, a new tool, and we’re not familiar with the technicalities of it,” he said on Tuesday.
“It’s a basic capacity issue,” he said of the bonds, which are structured around underlying assets in order to conform to Islamic religious guidelines.
Yemen originally planned to raise about $250 to $300 million from Islamic bonds in order to diversify government financing and to help lower its budget deficit, currently running at around eight percent of gross domestic product.
The country is currently under a $370 million loan programme from the International Monetary Fund. That deal was approved in August to shore up an economy that has been weakened by the fragile security situation.
The discovery last week of U.S.-bound parcels carrying bombs from Yemen has added to investor concerns about security in the Gulf state which helped send its currency, the rial, to record lows against the dollar earlier this year.
Yaqoub said such security threats had put pressure on the budget, reducing revenues from holiday makers and forcing the government to spend more on fighting militants.
“A number of investors are not investing as much as we wanted them to, and tourism is slowing down considerably,” he said.
“And the security is also affecting the fiscal situation because we’re spending much more on security measures that we used to.”
Final details of the sukuk bond pricing and amount are unlikely to be released until a few weeks before the issue, Yaqoub said, adding that a committee was formed to oversee the bond issue in June and to choose assets for collateral.
(editing by Sujata Rao)