The government of Yemen will delay the issue of its planned YR60bn ($260m) sukuk until the end of 2010 at the earliest.
The Finance Ministry had planned to issue the Islamic bond during the third quarter of the year, but undisclosed issues related to forming a team to oversee the bond issue have delayed plans, bankers and government sources say.
MEED reported in May that the Central Bank of Yemen was in talks with the Washington-headquartered International Monetary Fund (IMF) over the best way to structure the bond as part of a wider programme to raise finance and shorten the country’s budget deficit, which ran to 9.3 per cent of gross domestic product (GDP), or total economic output, in 2009.
A committee was formed to oversee the bond issue in June, a government official says, adding that the government still hopes to issue it before the end of the year.
The bond would be collateralised against existing government assets or goods like oil, a government source said at the time. Pricing is yet to be set and final details of the bond are unlikely to be released until a few weeks before its issue, most likely in late 2010 or early 2011.
Bankers remain sceptical over the degree of interest the sukuk will attract, given Yemen’s widely publicised social, security and financial problems, which come as income from oil export dwindles. Pricing will have to be extremely competitive, given a slew of bonds planned by companies and government which promise far greater security over the coming year.
“Yemen is going to the sukuk market, but who is going to buy it?” says one senior banker based in Saudi Arabia, which is likely to be a key target market for the Yemeni. “What is the price they are willing to pay? It is unfortunate, because Yemen could really benefit from this right now.”