Sukuk, Eurobond issuance awaits finance minister’s green signal

ISLAMABAD: A lack of decision could delay the issuance of much-needed sukuk and Eurobond, planned simultaneously in November, as authorities await the final green light from Finance Minister Ishaq Dar, sources said on Wednesday.

Sources said all the paperwork has been done to move ahead, but the government is still awaiting an approval from the finance minister to finalise six banks to simultaneously launch sukuk and Eurobond next month in order to generate much-needed $2 to $3 billion.

The sources said the time is ripe for launching the two bonds to jack up foreign currency reserves immediately. If the transactions get delayed another month, all the major financial capitals in the world will come in holidays mode because of Christmas and New Year festivals.

“Pakistan is running out of time to accomplish these transactions till November 15 so decision on selection of banks and lead managers should be taken without wasting any further time,” one top official told The News.

Finance ministry has already qualified a total of six banks for issuance of both sukuk and Eurobond. Four banks would provide services for both bonds, while Dubai Islamic Bank and Noor Bank might be hired for sukuk, sources said.

The country’s foreign currency reserves nosedived by over $2 billion during the first three months of the current fiscal despite loans of $1.5 billion. Pakistan’s total liquid foreign reserves stood at $20.05 billion on October 13 as the reserves held by the SBP stood at $14.157 billion and $5.895 billion by banks. 

Government had to rely on short-term borrowing of $370 million from international banks in mid of October to cope up with depleting reserves. The government raised $458 million through short-term borrowing in the first quarter of the current fiscal.

The country’s rating and other factors, however, seem favourable, sources said. International market is flooded with capital and Pakistan could receive favourable response on its planned transactions. 

 “The success of bonds will depend on the price received by our upcoming papers including sukuk and Eurobonds,” an official said. Countries like Iraq, Bahrain and others have already generated money through bonds.

The government also planned to move ahead with road shows in UK, US, Europe and some parts of Middle East in order to get substantial subscriptions.

Officials assessed value of portions of M-2 (Kallar Kahar to Lahore) and M-3 (Pindi-Bhattian to Faisalabad) in the range of over $1.5 billion as these two assets will be pledged against the Islamic bond. The country requires to pledging assets as collateral for Shariah-compliant paper. The individual investors are expected to get permission for investing at least $100,000 into Islamic bond. 

The lead managers will get advice from the account holders after getting knowledge about prospects of Pakistan’s economy through arranged road shows, which will be arranged ahead of the launch. An official said there are different benchmarks for individual and institutions for investing into sukuk. “The minimum benchmark varies for individuals and institutions.”