Turkey, planning its first sale of bonds that comply with Islamic law, may have to pay about a percentage point more in interest than on bonds sold in dollars that don’t have religious restrictions.
Turkey, the second-biggest Muslim economy after Indonesia, will probably have to pay a minimum of 5.5 percent annually on five-year debt to be attractive, according to Samer Mardini, vice president of fixed-income and Islamic finance products at SJS Markets Ltd. in Dubai. That’s 120 basis points higher than similar maturity dollar debt, data compiled by Bloomberg show.
Prime Minister Recep Tayyip Erdogan’s government, which won power in 2002, has sought more religious freedoms in secular Turkey, including adopting rules that will permit Islamic finance. The U.K. canceled what would have been the first sale of islamic debt by a Western government in February 2011, saying it didn’t offer value for money, while Luxembourg said in May it put an issue on hold as it saw no need for additional funding.
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