CAIRO, Feb 27 (Reuters) - The Egyptian government approved a draft law on Wednesday that will allow the state and private borrowers to issue Islamic bonds, or sukuk, and referred the legislation to the upper house of parliament, a statement said.
Egypt has never issued a sovereign sukuk. An international issue would help the government to replenish its dangerously low foreign currency reserves and provide a new way for tackling a budget deficit forecast to hit 12.3 percent of GDP in the year to end-June unless economic reforms are made.
An earlier version of the sukuk law had been criticised by Islamic scholars, forcing a rethink.
Egypt's foreign reserves stood at $13.6 billion at the end of January, less than the $15 billion level needed to cover three months' of imports.
The government this week published a summary of an economic reform programme aimed at reining in the deficit. It aims to boost the foreign exchange reserves to $19 billion by the end of June, but did not say how that could be achieved.
Finance Minister Al-Mursi Al-Sayed Hegazy, an expert on Islamic finance, said in January that the Islamic Development Bank, a multilateral institution, could be ready to buy around $6 billion of sukuk. (Writing by Tom Perry; editing by David Stamp)