Move to promote Islamic mode of financing: MoF proposes draft amendments to MTBs, Ijara Sukuk rules

ISLAMABAD: The Finance Ministry has proposed draft amendments to Pakistan Market Treasury Bills and Ijara Sukuk Rules to promote Islamic mode of borrowing (financing) in the country by pledging assets.

The Finance Ministry has uploaded two separate notifications on its website, one with regard to draft amendment in the Government of Pakistan Market Treasury Bills Rules, 1998, and the other of draft amendments in the Government of Pakistan Ijara Sukuk Rules, 2008.

When contacted, an official said that these draft amendments are aimed at removing hurdles and facilitating Islamic mode of borrowing.

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The official added that there is an intention to increase the Islamic mode of borrowing from two to 10 percent as the difference between Islamic mode of financing, which is acquired by pledging of assets in contrast to conventional borrowing.

The draft amendments have been placed on the website for 15 days to solicit, if any, suggestions, from stakeholders before submission to the federal cabinet for approval.

According to the notification, the draft amendment in the government of Pakistan Market Treasury Bills Rules, 1998, which the federal government proposes to make in the exercise of its power conferred the Public Debt Act, 1944. In the aforesaid rules, for rule 5, “the Treasury Bills shall have such period of maturity not exceeding twelve months as the Finance Division may from time to time determine” shall be substituted.

The draft amendments in Ijara Sukuk Rules, 2008, which the federal government proposes to make in exercise of its power conferred by the Public Debt Act, 1944, as required by subsection (1) of section 28 of the aforesaid Act.

In the aforesaid Rules, for rule 2, it shall be substituted that “the Finance Division shall determine the range of maturity periods of the Sukuk issued by the Pakistan Domestic Sukuk Company Limited in accordance with the government financing needs”.

For the aforesaid Rules rule 4, it shall be substituted, “the profit on the Sukuk shall be paid quarterly, bi-annually or as per the frequency determined by the Finance Division. The profit shall be determined on the basis of the rental rate announced by the State Bank of Pakistan (SBP) prior to the start of each rental period” shall be substituted.

Copyright Business Recorder, 2023