ISLAMABAD: The federal government has decided to issue domestic and international Sukuk and raise other Shariah-compliant financing facilities against unencumbered assets of the government, well-informed sources told Business Recorder.
This decision was taken by the caretaker Federal Cabinet on February 26, 2024, on a summary of the Ministry of Finance. It is unclear, how much money, the government intends to raise through Sukuk and Shariah-compliant financing facilities.
The Finance Ministry, sources said, has conveyed the decision of the caretaker Federal Cabinet to all the concerned ministries along with the request to identify unencumbered portions of assets.
According to the Finance Division, the Federal Cabinet on February 26, 2024, has approved the Finance Division’s summary on the issuance of domestic and international Ijara Sukuk and raising other Shariah-compliant financing facilities against unencumbered assets of the government vide case No. 111/Rule-19/2024/140.
The sources said the Finance Division has accordingly requested the Power Division to; (i) identify unencumbered portions of the enclosed list of assets; i.e., land and equipment of solar power plants located at Haveli Bahadur Shah and Muzaffargarh; (ii) provide No Objection Certificates to Finance Division for utilization of the identified assets for issuance of domestic and international Ijara Sukuk and raising other Shariah-compliant financing facilities; and (iii) issue necessary directions to authorities concerned to facilitate government’s financial advisors for valuation of the assets.
The Finance Division, sources said, has also assured the Power Division that the Sukuk and other Shariah-compliant financing facilities transactions will not create any financial liabilities for the Power Division.
In October 2023, the caretaker federal cabinet had granted its approval to the summary presented by the Ministry of Finance regarding an amendment to the existing Government of Pakistan Market Treasury Bills, 1998, and the Government of Pakistan Ijara Sukuk Rules, 2008.
These amendments were aimed at enhancing the efficiency and providing flexibility for the issuance, registration, trading, and transfer of government securities through any institution.
The Finance Division had stated that the implementation of these rules will not only make participation in government securities auctions/ issuance simpler but will also expand the investor base.
It is also expected that these amendments will help in reducing the cost of borrowing as greater diversification will significantly enhance the subscription in government securities.
Copyright Business Recorder, 2024