State Bank starts issuing Islamic Naya Pakistan certificates for expatriates

Karachi: The State Bank of Pakistan has started issuing Islamic Naya Pakistan Certificates (INPCs) from Friday for overseas and resident Pakistanis with declared assets abroad.

The SBP said the certificates offer “very attractive expected rates of 5.5 to 7 percent” on dollar investment and “9.5 to 11 percent” on rupee INPCs.

INPCs are available only through digital bank accounts, which can be opened online by overseas Pakistanis and by visiting a branch of one of eight designated banks by locals, the SBP said.

The government has already established a special purpose vehicle, namely Islamic NPC Company Limited (INPCCL), which will be managed under the mandate of its board of directors.

The company will be issuing INPCs denominated in the US dollar and in the local currency to the agent banks and investors.

The SBP said the INPCCL will establish two Mudaraba pools in the above referred currencies for issuing the Islamic certificates.

The minimum amount of investment on the US dollar denominated three-month, six-month, 12-month, 3-year and five-year tenors’ Islamic certificates is $5,000 with integral multiples of $1,000. The minimum amount of investment on the rupee denominated Islamic certificates is Rs100,000 with integral multiples of Rs10,000. The profit on three-month, six-month and 12-month tenor certificates would be paid on maturity along with principal or on premature encashment. Profit on three-year and five-year INPCs would be paid on a half-yearly basis.

The government already launched conventional certificates for overseas Pakistanis to lure foreign exchange reserves into the economy.

The target market is huge. An estimated 10 million Pakistanis live abroad. Of them, 4.7 million are in the Middle East. Though Pakistan’s current account position is improving, it’s still susceptible to risks of outflows on foreign debt repayments and expected decline in remittances.

Pakistan's current account deficit narrowed to 1.1 percent of GDP in FY2020, from a peak of 6.1 percent in FY2018, due mainly to import compression and lower oil prices. Global ratings agency Fitch forecasts a slight widening of the current account deficit to 1.7 percent in FY2021 due to a modest recovery in imports and declining remittances.

While remittances were seen growing, “we view this as temporary and expect a decline of about 10 percent in FY2021 due to the impact of the global economic shock on Pakistan's overseas workers,” Fitch said last month while affirming the country’s B negative rating. The three-, six- and 12-month tenor certificates will be single-coupon securities on which principal and profit will be paid on maturity or on premature encashment.