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ISLAMABAD: Finance Ministry on Sunday clarified that Sukuk were Shariah compliant borrowing instruments backed by physical assets, and were structured so as to pay returns on investment as rent instead of interest by utilizing an underlying asset.

"Sukuk are not only issued to support the government’s budgetary position, but also to promote Islamic banking finance in the country, which is a constitional obligation," said Finance Ministry in a statement.

It said that the government of Pakistan had issued Sukuk several times, which were backed by assets such Motorways (M1, M2, M3) and Jinnah International Airport.

Other Federal government assets such as the Islamabad Expressway, Allama Iqbal International Airport and F-9 Park have been identified, in consultation with experts in Islamic finance, as good potential candidates for Sukuk structures.

The statement emphasized that the benefits of Sukuk include lower financing cost for the government; provision of Shariah-compliant investment avenues; fulfilment of the constitutional requirement of eradication of riba; and promotion of the Islamic financial industry.

The statement added that the Sukuk market was growing rapidly around the world. Till the close of 2019, Sukuk worth USD 1,247 billion have been issued globally.

Malaysia has been the global leader in Sukuk market, it said, adding other important issuers were Saudi Arabia, UAE, Qatar, Oman, Jordan, Turkey, Morocco and Indonesia.