The Central Bank of Yemen, has launched the country's first sukuk issue and plans to issue additional Islamic bonds worth $500 million this year, the official Yemen News Agency Saba reported Saturday.
The sukuk, issued Saturday, are valued at 4 billion Yemen rials ($18.74 million) and will be used to finance three local road projects, Saba reports.
The Islamic bonds will provide medium-term financing for local development projects and they will be an acceptable substitute for treasury bills, Mohammed Bin Hammam, the central bank's governor said according to the news agency.
Yemen is seeking to issue, through its central bank, sukuk worth $500 million by the end of the current year.
The International Monetary Fund (IMF) and the World Bank are assisting Yemen on the technical aspects of issuing commercial paper under a technical agreement which the World Bank Group has with the Jeddah-based Islamic Development Bank (IDB) Group to assist its member countries to help formulate policies to raise financing for infrastructure, development and budgetary support.
This includes raising funds from the capital markets which in turn includes Shariah-compliant papers such as sukuk. The IMF has in the past assisted Iran and Sudan under its consultation programs to issue Musharaka sukuk whose proceeds were used for infrastructure development and as a monetary policy management tool. Similarly, the World Bank and the International Finance Corporation (IFC), the private sector funding arm of the World Bank Group, have also issued local currency sukuk in Malaysia and the UAE to finance some of their activities in the two regions.
At the same time the Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the IDB Group, which has close links with the Yemeni government and the Islamic banking sector, is also acting in an advisory capacity in issuance of a sovereign sukuk by Yemen.
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