Sukuk bond issuance: Cabinet rejects placement of F-9 Park as guarantee

ISLAMABAD: The federal cabinet has rejected the Ministry of Finance summary for placement of F-9 Park Islamabad as asset back guarantee for issuance of Islamic denominated Sukuk bond to fetch $750 million to $1 billion, it is learnt.

The Ministry of Finance has been tasked to place any other asset such as the luxurious Islamabad Club or Islamabad Expressway as guarantee for launching Sukuk bond. The minister for finance along secretary finance made all out efforts to convince the cabinet colleagues, but no one listened to them and rejected the summary for launching Sukuk bond on the guarantee of F-9 Park. The Ministry of Finance in its summary stated that the worth of F-9 Park having an area of 750 acres of land was estimated at Rs900 billion and in case of launching bond its rent was provided to buying investors. There is concept of buying back the asset at time of maturity of bond period, the summary stated. It was depressing moment for Finance Ministry high-ups who are responsible for managing fiscal affairs of the country. They argued that the Islamic Sukuk bond was cheaper mode of financing as if this bond was not launched then Pakistan will have to manage financing for budget deficit at 70 basis points higher through domestic T-bills.

“You as media persons are also responsible for this rejection of summary because you all have created media hype and today the cabinet did not listen to our arguments,” said a top official when this correspondent entered one room of Q-Block (Finance Division) on Tuesday afternoon.

They said that they wasted nine months to reach a stage for issuance of Sukuk bond. The market possessed liquidity and there is ample chance to get attractive deal at this juncture, they further added.

On the issue of debt strategy, the Finance Ministry told the cabinet that the public debt went up by Rs11,000 billion in last two years as it increased by Rs6,000 billion because of interest payments, Rs3,000 billion in the wake of devaluation, Rs1,000 billion after outbreak of COVID-19 pandemic and Rs1,000 billion under the present regime. It is misleading statement before the cabinet as the total debt and liabilities increased from around Rs29 trillion to Rs44.5 trillion in last two fiscal years as shown by the data of State Bank of Pakistan. The Ministry of Finance also stated that Sukuk are not only issued to support the government’s budgetary position, but also to promote Islamic banking finance in the country, which is a constitutional obligation. The government of Pakistan has issued Sukuk several times, which were backed by assets such as Motorways (M1, M2 and M 3) and Jinnah International Airport. Other Federal Government assets such as the Islamabad Expressway, Allama Iqbal International Airport and F-9 Park have been identified in consultation with experts in Islamic finance, as good potential candidates for Sukuk structures. The Sukuk market is growing rapidly around the world. Till the close of 2019, Sukuk worth $1,247 billion have been issued globally. Malaysia has been the global leader in Sukuk market. Other important issuers are Saudi Arabia, UAE, Qatar, Oman, Jordan, Turkey, Morocco and Indonesia.