Libya Considering First Islamic Loan

Bloomberg reports that Libya is considering issuing bonds to finance big increases in oil refining and chemical production, forecast to cost $60 billion.

Mohamed Alloub, chairman of the state-run Libyan Petroleum Institute, told the news agency that Islamic debt is one of the options being considered.

Libya may have to pay more than 6 percent to raise the funds, which compares to 2.3 percent (185 basis points over Libor) for a similar venture in Saudi Arabia.

The country is planning to boost refining capacity to 1 million barrels a day, from a current level of 380,000 bpd, to meet growing domestic fuel demand.

Libya passed a law this year to ban non-Shariah-compliant banking by 2015. According to the report, the average yield on Islamic bonds from borrowers in the oil-producing Gulf Cooperation Council (GCC) was 3.87 percent, according to HSBC/Nasdaq Dubai indexes, compared with 4.57 percent on non-Islamic debt in the Middle East.

Central Bank Governor Saddek El Kaber [Saddek Omar Elkaber] told Bloomberg that the government is progressing toward seeking a credit rating from Standard & Poor’s, and has appointed a company to assist in the process.

Giyas Gokkent, Chief Economist of National Bank of Abu Dhabi, says Libya would qualify for a rating of BBB, or S&P’s second-lowest investment grade, provided security conditions improve.

(Source: Bloomberg)

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