Govt raises Rs75.43bln via fixed, variable rates

KARACHI: The government on Thursday raised Rs75.439 billion through the auction of five-year fixed and variable rental rates Government of Pakistan Ijara Sukuk, in a bid to help finance the budget deficit.

The government raised Rs67.189 billion via the auction of Ijara Sukuk (variable), while the amount realised through fixed rental rate Sukuk was Rs8.250 billion, according to the central bank’s auction result.

The cut off fixed rental rate was 9.45 percent.

Last month, the State Bank of Pakistan issued the auction calendar for issuance of Sukuk based on Ijara for five years.

Pre-auction target for variable and fixed rental rate Sukuks during January-March 2021 set at Rs150 billion.

Bankers said the latest result showed an increased demand for Shariah-compliant instruments in the market, evident from the fact that the yield on fixed rate Sukuk instruments stood at 9.45 percent, which was higher from the previous yields.

Pakistan’s Sukuk market saw a significant increase in issuance volumes and values in 2020.

Issuance of Ijara Sukuk based on variable and fixed rental rates was Rs561 billion last year.

Besides, Rs200 billion worth Pakistan Energy Sukuk II was also issued, making a total of Rs761 billion Statutory Liquidity Ratio (SLR) eligible Sukuk or Islamic bonds in 2020.

The government raised funds through the fresh five issues of fixed rate Ijara Sukuk. Instead of issuance of a new Sukuk, it had generated financing via reopening of four variable-rate existing Sukuk. There were three fixed rate Sukuk issues via reopening in the year under review. The Sukuk offerings gained momentum in the country after a gap of five years. There was no single issuance of Ijara Sukuk between 2016 and 2019. The government issued first of its kind a Rs200 billion Pakistan Energy Sukuk in March 2019 to tackle the circular debt issue in the power sector.