Egypt has begun the sale of its first Islamic debt issuance, reportedly attracting strong demand. The three-year Sharia-compliant bonds, known as sukuk, were expected to raise $1.5 billion and demand is believed to have topped $5.8 billion, excluding joint lead manager interest, according to a document reviewed by Bloomberg on Tuesday. The dollar-denominated bonds were priced at an initial yield of around 11.625 per cent, but the guidance was tightened to about 11.125 per cent, the report said. The sukuk, which will be listed on the London Stock Exchange by the Egyptian Financial Company for Sovereign Tasheek, is aimed at helping ease Egypt’s foreign currency crunch, pay off debt, and finance investment and development projects. Egypt’s economy fell into crisis following the Russia-Ukraine war, which triggered large foreign investment outflows. The country has devalued its currency three times since March and has agreed to a $3 billion rescue plan with the International Monetary Fund. It is also one of the region’s most indebted countries, with debt at 88.5 per cent of gross domestic project in the 2021-22 fiscal year that ended in June. Egypt is due to repay $1.25 billion in five-year Eurobonds that matured on Tuesday. Abu Dhabi Islamic Bank, Citi, Credit Agricole, Emirates NBD, First Abu Dhabi Bank and HSBC are managing the sukuk transaction. The trustee is a joint stock company fully owned by Egypt’s finance ministry with the sole purpose of issuing sovereign sukuk. Its proposed $5 billion trust certificate issuance programme, outlined in a LSE circular on February 14, was assigned a B3 rating by Moody’s Investors Service. Obligations rated B are considered speculative and subject to high credit risk. The rating mirrors Egypt’s sovereign credit rating, which was downgraded earlier this month due to “reduced external buffers”, Moody's said. S&P Global assigned the programme a preliminary B rating, matching its October sovereign rating. “The Egyptian government will ultimately use the proceeds of the sukuk to finance its investment and development spending,” S&P said. Egypt’s government has talked of offering Islamic bonds for years. The finance ministry began developing the regulatory framework in 2019 and the Sovereign Sukuk Law was ratified in August 2021. The sukuk issuance will mark the first time Egypt has turned to the international debt market since a $500 million private placement of its debut yen-denominated, or samurai, bonds in March 2022. Global issuance of Islamic bonds is projected to grow at a compound annual growth rate of 6.8 per cent to reach $257 billion in 2027, according to a September report by Refinitiv. Malaysia, Saudi Arabia and Indonesia are the largest issuance bases for sukuk, together accounting for 75 per cent of the sukuk issued in 2021.