For tenor of three and six months: Change proposed in Ijara Sukuk rules

ISLAMABAD: The government has proposed changes in Ijara Sukuk rules for securing financing of Islamic financial institutions and banks into three- and six-month instruments. Under the last transaction of Sukuk, the federal government secured Rs371 billion.

At the moment asset-backed guarantees are required for domestic Sukuk bonds but now under the proposed amendments in the rules, which will require the assent of the federal cabinet, the Ministry of Finance wants to diversify financing instruments in order to bridge financing through Islamic instruments. Instead of holding asset-backed guarantees till the clearing of outstanding liabilities, three and six months of Sukuk would help secure financing with light Sukuk.

According to SRO (1)/2023, the draft amendments in the Government of Pakistan Ijara Sukuk Rules 2008, following shall be substituted:

Maturity period: 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.

Profit: 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 rental rate announced by the State Bank of Pakistan prior to the start of each rental period; and the Sukuk shall be held by individuals, institutions, trusts, funds of all types, bodies corporate including banks, non-banking finance companies and insurance and takufal companies irrespective of their residential status.

The investment by non-residents shall be in foreign exchange remitted through the official channels. Such investments shall be eligible for repatriation of the principal as well as periodic profit on the Sukuk but the exchange risk shall be that of the investor.