Federal cabinet greenlights issuance of Sukuk bond
- Custody of underlying asset to be given to State Bank of Pakistan
The federal cabinet on Tuesday approved issuance of a Sukuk bond and stressed that the custody of the underlying asset behind the bond would be given to the State Bank of Pakistan (SBP), reported Aaj News.
After the approval, the nation is all set to issue the Sukuk bond, which is a financial certificate that complies with Shariah law.
Back in January, lawmakers had made plans to issue US dollar-denominated Sukuk bonds as Pakistan looks to shore up its foreign exchange reserves in the face of a rising import bill.
The inflow would boost the country’s reserves and help arrest the rupee's slide.
Pakistan looks to issue US dollar-denominated Sukuk bonds
Pakistan had mandated Credit Suisse, Deutsche Bank, Dubai Islamic Bank and Standard Chartered Bank as joint lead managers (JLM) and joint bookrunners (JBM) to organise a series of investor calls on Tuesday, January 18, 2022.
“A US dollar-denominated benchmark 7-year Sukuk offering under the Trust Certificate Issuance Programme of The Pakistan Global Sukuk Programme Co, will follow, subject to market conditions,” said a report at the time.
On January 25, 2022, Pakistan issued $1 billion Islamic Sukuk in the international market at 7.95% interest rate for a period of seven years.
An official of Finance Ministry on condition of anonymity confirmed that the Islamic bond has been issued but information with regard to subscription remains unclear.
The previous government had decided to raise over $3 billion from the international market through issuance of Eurobond/international Sukuk in the budget for fiscal year 2021-22.
Earlier this month, Fitch Ratings said Islamic finance industry in Pakistan is expected to continue its growth trajectory over the medium term, driven by strong government push and steadily rising public demand for Islamic products.
Fitch expects sovereign Sukuk issuance to rise on the back of high gross financing needs.
“Pakistan’s Sukuk market is developing with outstanding volumes of USD 11 billion at end-1Q22, with 82% in local currency. Also, guidelines on issuing green Sukuk and bonds were issued in 2021 by the Securities and Exchange Commission of Pakistan,” said Fitch.
Meanwhile, Moody's had said in February that the issuance of Sukuk by Pakistan, together with the $1 billion disbursement from the International Monetary Fund’s Extended Fund Facility (EFF), will help shore up the economy’s reserves amid a sharp widening of the current account deficit.
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