Egypt approves new Islamic bond law

Egypt's parliament approved on Tuesday a law allowing the issuance of Islamic bonds which could provide the heavily-indebted government with a new form of finance.

The Islamist-led upper house voted in favour of the law that was passed by the government on Feb. 27 and sent it to President Mohamed Mursi for final approval.

Finance Minister Al-Mursi Al-Sayed Hegazy said last month that Egypt could raise around $10bn a year from the sukuk market - much more than some analysts expect - but added that it would take at least three months to push through the necessary regulations.

Egypt has never issued a sovereign sukuk. An international issue would help the government replenish its dangerously low foreign currency reserves which dropped to the critical level $13.5 billion in February.

The upper house voted against a demand from the Nour Party, Egypt's main hardline Islamist group, that the law should be approved by scholars at Al-Azhar, a religious institution which should be consulted on matters related to Islamic law according to a new constitution.

Egypt has endured over two years of political and economic instability and the pound has lost more than 8 percent of its value against the dollar since the end of last year.

The government is seeking a $4.8bn loan from the International Monetary Fund to secure to support its ailing economy.