Govt to raise Rs100bln via domestic Sukuk in Sept

KARACHI: The government plans to raise Rs100 billion through the auction of five-year Ijara Sukuk this month against three identified assets, the central bank’s said on Monday, fulfilling a longstanding demand from the Islamic banking industry.

The government expects to raise Rs75 billion through the auction of variable rental rate Government of Pakistan Ijara Sukuk. This Sukuk will be auctioned on September 30, according to the auction calendar.

State Bank of Pakistan (SBP) will also sell fixed rental rate Sukuk worth Rs25 billion. This bond’s auction will also take place on the same date.

The assets for the issuance include M-1 (Islamabad –Peshawar Motorway), the highways land along with all constructions and improvements thereon the M1 (Islamabad-Peshawar Motorway).

M-4 (Pindi Bhatian-Faisalabad Motorway) the highway land along with all constructions and improvements thereon the M-4 (Pindi Bhatian –Faisalabad Motorway), and E-35 (Hassanabdal –Mansehra Motorway) the highway land along with all constructions and improvements thereon the E-35 (Hassanabdal –Mansehra Motorway).

The issuance of the Sukuk was the most important demand from the Islamic banking industry.

Bankers expect this move to provide the necessary push for investment to Islamic banks for the suitable application of surplus deposits.

The government issues conventional debt instruments such as treasury bills and Pakistan Investment Bonds on a regular basis and as per schedule. The regular issuance for domestic Sukuk is likely to provide a level-playing field with conventional banks.

The SBP will conduct an auction through which Sukuk investors will be identified. Non-competitive bidders may also submit their bid for the Sukuk. For this purpose, non-competitive bidders will authorise any of the primary bidders through signing of an authorisation form.

The investors will execute the Sukuk subscription undertaking to record the commitments of the Investors to subscribe to the Sukuk to be issued by Pakistan Domestic Sukuk Company Limited (PDSCL). Under the Sukuk subscription undertaking, the investors may appoint PDSCL as their agent for purchase of the assets on their behalf and for the purposes set out in Sukuk issuance undertaking. The primary dealers will also sign the Sukuk subscription undertaking on behalf of successful non-competitive bidders.

PDSCL and SBP’s Banking Services Corporation (SBP-BSC) will execute an agency agreement whereby PDSCL will appoint SBP-BSC as its agent to collect proceeds from the investors, collect rentals and other payments due from the and distribute the same to the investors, and act as reference agent and registrar government for the investors.