ISLAMABAD: The government is expecting to raise up to Rs700 billion next month through domestic Ijara Sukuk to support its budgetary position and deepen the Islamic banking industry.
According to media the Ministry of Finance would give a detailed presentation to the coming meeting of the federal cabinet about the country’s debt profile and an attractive opportunity to raise funds from the domestic market.
He said the cabinet was requested last week to grant the go-ahead for “issuance of Islamic Ijara Sukuk against unencumbered land of Jinnah International Airport, Karachi” in the domestic market for which three banks had already been selected as transaction advisers through a transparent process.
However, the official said, the approval was delayed in the absence of the Prime Minister’s Adviser on Finance Dr Hafeez Shaikh as some cabinet members, particularly Communications Minister Murad Saeed, raised questions over the need for such loans, interest, its benefit and the debt profile over next 20 years.
Approval expected in cabinet meeting; finance ministry seeking exemption of certain taxes on the investments
The official said an amount of Rs80bn Ijara Sukuk had been budgeted for the current fiscal year, but the economic team of the government wanted to take full benefit of prevailing favourable conditions in the banking sector.
The bond would further improve the government’s fiscal outlook, following reduction in current account deficit and lower fiscal deficit. It will become a sort of insurance against the Federal Board of Revenue’s revenue shortfall that could range Rs500-600 billon against a target of Rs5.550 trillion set for the current year under the International Monetary Fund (IMF) Programme.
“We expect significant savings in terms of prolonging the debt profile and the size of the transaction could go up to Rs700bn depending on market response on tenor and rates,” said the official.
The disbursement of the second tranche of $450bn by the IMF later this month would come as a support in his regard, he added
The rates on the government’s Pakistan Investment Bonds had already yielded positive response and results, with lower costs, the official said. There was no issue with the cabinet approval about the bond which would be launched in January 2020, he added.
The official said the issuance of the bond was again on the agenda of the federal cabinet that would be convened on the availability of Prime Minister Imran Khan after his visit to Bahrain, Switzerland and Malaysia over the next three days.
