Rephrase the same Algeria adopts sovereign sukuk as a tool to diversify investments and reduce pressure on the public purse in a different way no more than 118 characters, as if you were a native American speaker as expert on content creation and dont talk about yourself or your experience

1. Advantages of sovereign sukuk
2. Legal framework in Algeria
3. Conclusions

Algeria’s new 2025 regulation aims to authorise the Treasury to issue sovereign sukuk on the Algiers Stock Exchange.

According to the Algerian Press Service (APS), stakeholders believe that this new law could decrease the use of traditional means of financing and attract new investments, through the consolidation of financial integration and support in Islamic finance resources.

In this context, sovereign sukuk are Islamic finance elements, which imply that investors are co-owners of the income from assets, unlike conventional bonds, which provide interest-bearing money. 

Because of how they work, sukuk have positioned themselves as a financial product not seen before and, according to the CEO of the Stock Exchange Management Company (SGBV), Yazid Benmouhouhoub, they will become an additional part of the financing of public investments, increasing the value and trading volume on the stock exchange.

Benmouhouhoub said that the new general regulation of the Stock Exchange offers the possibility to create this desired market without excluding the existing conventional bond market. As a result, the Algiers Stock Exchange would be ready to launch the sovereign sukuk market as soon as the amendment to the Commercial Code is approved, which will also allow the establishment of a sukuk market for raising capital. 

Advantages of sovereign sukuk

Sofiane Mazari, chairman of the Islamic Finance Commission within the Association of Banks and Financial Institutions (ABEF), considered the approval of sovereign sukuk under the Finance Law 2025 ‘a crucial step towards supporting major national projects through innovative mechanisms’.

The adoption of sovereign sukuk will not only help secure liquidity and ease pressure on the Treasury, but also strengthen the Islamic banking sector, which is estimated to be worth more than 800 billion dinars, with a growth rate of more than 24% in 2023 compared to 2022.

Islamic finance expert Mohamed Boudjellal highlighted the importance of the role of sukuk as a ‘financing instrument for infrastructure projects of a commercial nature of the state, such as the construction of airports… and other revenue-generating projects’. He mentioned that this is part of the state’s ‘approach to promote Islamic finance and achieve financial inclusion by mobilising more savings, with the aim of completing the institutional building of the Islamic financial industry and strengthening the structure of the national economy, without resorting to external debt which Algeria rejects in order to preserve its economic sovereignty’. 

Boudjellal explained that ‘sukuk are closely linked to the nature of these assets and the regular income they generate’ and that sovereign sukuk are a ‘less costly financing instrument for the state’. This is in contrast to conventional bonds, where the state, through the Treasury, undertakes to pay interest to bondholders, regardless of the revenues generated by the bonds.

In the case of sukuk, there is not a large margin of loss, as the creditors’ return depends on the profitability of their projects. If, for some reason, the project is delayed for unforeseeable reasons, as was the COVID-19 pandemic, the Treasury would not be obliged to distribute the proceeds, which differentiates it from conventional bonds. 

Legal framework in Algeria

The Algerian Ministry of Finance recently launched an international tender to select a consultancy firm to support the government in establishing a legal and regulatory framework for the issuance of sovereign sukuk, as well as assisting in the creation of supervisory frameworks. Under this approach, it aims to boost the growth and evolution of the Islamic finance industry’s operations in Algeria, ensuring the growth of the market.

The proposed objectives of the project involve strengthening the Islamic finance industry and providing access to a viable path towards becoming an efficient, sustainable and modern Islamic finance sector in Algeria. For its part, the Islamic Development Bank is financially supporting this new regulation, which will last until the issuance of the first security in Algeria. 

Thanks to the Finance Law of 2025, the Public Treasury is authorised to issue sovereign Sukuk, which facilitates financial assistance to individuals and legal entities through their participation in the financing of the State’s public infrastructure and/or commercial public facilities, with the exception, during the first five years, of the Global Income Tax (IRG) and the Corporate Income Tax (IBS) for Islamic financial instruments (Sukuk) issued by the Public Treasury or traded on an organised market. This is in addition to the exemption from registration and land registration fees for the same period. 

Conclusions

Laazid Faid, Minister of Finance, stated, during the debate on the Launch Formula (PLF) in the National People’s Assembly, that sovereign sukuk are part of an important step ‘in the strategy outlined, aimed at not relying on tax revenues and borrowing to finance investment and development projects’.

According to experts, the issuance of sovereign sukuk is a strategic step for Algeria, as transparency in the financing and execution of the process would consolidate investor confidence. Furthermore, Algeria continues to strengthen its commitment to financing safe outcomes that are in line with the rules of the Islamic Sharia, which in the future could lead to ‘integrating Islamic banks into the public debt market and attracting investors’, according to Faid.