Sukuk Bond may be launched next week

ISLAMABAD: Following the staff-level agreement with the IMF, the government has decided to launch the Islamic denominated Sukuk Bond to earn $1 billion inflows by pledging one portion of the Motorway (M-1) as asset back guarantee.

“After getting the backing of IMF in the shape of staff-level agreement, the government has decided to launch the Sukuk Bond probably next week. The federal cabinet had already granted approval and tax exemption for accomplishing this transaction,” top official sources confirmed to The News here on Tuesday.

The official said that the Ministry of Finance was securing a No Objection Certificate (NOC) from relevant quarters and it was expected that the Sukuk Bond for fetching around $1 billion would be launched next week, probably on coming Monday.

Pakistan had already paid back $1 billion on the maturity of the Sukuk Bond on October 13, 2021, after the completion of five years. This bond was launched during the tenure of PMLN government in 2016.

Now it was decided that the fresh Sukuk Bond will be launched soon after striking a staff-level agreement with the IMF staff with the hope that Islamabad would be able to get a 'favorable' deal in the shape of getting competitive mark-up on offered amounts from potential investors.

"The government has decided that the M-1 portion from Islamabad to Chakwal will be pledged as asset back guarantee for launching the Sukuk Bond. All necessary arrangements have been made and the government is waiting for some procedural requirements. It requires NOC from some relevant departments. It is hoped that the Sukuk Bond-related transaction will be accomplished next week,” said one top official.

The Ministry of Finance had already secured a No Objection Certificate (NOC) from the Ministry of Aviation and Ministry of Communications related to airports and portions of motorways for holding asset-backed guarantees to launch the Sukuk Bond. The federal cabinet has already granted approval for issuing transactions of international bonds for 12 months period. The Ministry of Law also validated that after approval on the basis of 12-month note program, there was no need to seek fresh approval for launching of this Sukuk Bond. The Ministry of Finance had estimated to launch $3.5 billion through international bonds out of which the government has so far launched $1 billion bonds in July 2021.

Now the government intends to launch a $1 billion bond keeping in view the appetite of the market. The government also hired the services of four financial advisers to accomplish this upcoming transaction.

"The remaining $1 to $1.5 billion bonds will be launched in the second half (Jan-June) period of FY2022,” said the official sources. Pakistan’s current account deficit surged by $1.6 billion in October mainly because of a sharp increase in import bills. The State Bank of Pakistan had estimated that the CAD might hover around 2 to 3 percent of GDP, equivalent to $6 to $9 billion during the ongoing fiscal year but after four-month (July-Oct) period, it seems that the CAD may cross $15 billion mark.