Escalating fiscal deficit: Cabinet approves domestic Sukuk bond for generating Rs700 bn

ISLAMABAD: The federal cabinet on Tuesday approved launching domestic Sukuk bond for generating Rs700 billion for financing the escalating budget deficit and meeting the increasing financial requirements for combating COVID-19.

The cabinet approved to pledge Jinnah International Airport Karachi’s land as guarantee to launch Islamic denominated Sukuk bond.

“The cabinet approved launching of the Islamic Sukuk bond after pause of long period to finance the budget deficit in the wake of increasing financial requirements after the outbreak of COVID-19,” said official sources after the cabinet meeting that was chaired here by Prime Minister Imran Khan.

The sources said whenever the Finance Ministry presented summary for issuance of Sukuk bond, there were certain ministers of the PTI government who always used to sternly oppose the move arguing that how the PTI would continue following the path of Ishaq Dar, former finance minister of the PML-N government who used to launch the Sukuk bond by pledging the country’s motorways and assets and now they would do the same.

The sources said that due to the stance adopted by these ministers, the government had to borrow huge sums from commercial banks because of higher policy rate that was still in the range of double digit.

The budget deficit might further escalate in the wake of massive FBR’s shortfall and non-materialisation of certain financing items of the budget deficit on front of privatisation proceeds in the wake of existing lockdown owing to COVID-19 if it persisted till June 2020.

The financing requirements of escalating budget deficit increased manifold and the Finance Ministry finally decided to get financing from Islamic banks through issuance of Sukuk bond. However, the IMF has agreed that the expenditures incurred on COVID-19 would not be made part of the budget deficit of Pakistan.