Govt to Issue Domestic and International Ijara Sukuk Worth $3.5 Billion

The government has decided to issue domestic and international Ijara Sukuk worth $3.5 billion against ‘Unencumbered’ assets of the government including Allama Iqbal Lahore, Islamabad, Multan International Airports and some portions of M-1 and M-3 motorways as well as Islamabad Expressway.

Sources told Propakistani that the federal cabinet will give the approval on Tuesday (today), to utilize these assets for the issuance of domestic and International Ijara Sukuk.

The Finance Division intends to take forward its domestic and international Ijara Sukuk programs to support the government’s budgetary position and promote the Islamic banking industry in-country.

Sukuk are Sharjah compliant borrowing instruments structured to pay returns on investment as rent instead of interest by utilizing an underlying asset. In the case of Ijara Sukuk, tangible assets are utilized to structure the transactions.

Sources said that the Finance Division has undertaken 32 domestic and 4 international Ijara Sukuk transactions amounting to Rs 1,573 billion and $ 3.6 billion to date. Further, the government has also issued two ‘Energy Sukuk’ of Rs 200 billion each in March 2019 and May 2020 of selected government-owned power generation and distribution companies to settle power sector arrears.

Presently, the government has utilized (MI, M2 and M3 Motorway, Jinnah International Airport Karachi) assets for domestic Ijara Sukuk in the past.


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The M2 motorway was utilized in January 2005 for international Ijara Sukuk and later on, it was divided into three sections which were utilized from December 2014 onwards. At present, M1 and M3 motorways, the Islamabad Chakwal section of M2 Motorway are unencumbered.

Besides this, the government initiated a domestic Ijara Sukuk program of Rs. 756 billion by utilizing the unencumbered land of Jinnah International Airport (JIA), Karachi in March 2020. The asset is almost fully utilized with the issuance of domestic Ijara Sukuk worth Rs. 636 billion, and structuring of Islamic Naya Pakistan Certificates (INPCs) of around Rs. 59 billion.

As JIA Karachi will be exhausted shortly, there is an urgent need to identify new unencumbered assets to ensure uninterrupted issuance of Ijara Sukuk in the domestic as well as international capital markets.

Sources said that the continuity in the issuance of domestic Sukuk will also enable the government to meet its target of having 10 percent Shariah-compliant instruments in domestic securities by the end of FY23 (Medium-Term Debt Management Strategy 2019/20-2022/23).

At end-December 2020, this was at 3.8 percent. The Federal Cabinet In its meeting dated January 26, 2021 directed the Finance Division to Identify options of underlying assets for Sukuk issuances.

Sources said that the finance division has proposed to raise $3.5 billion out of Rs. 1.2 trillion needed for raising additional resources as per the next year’s domestic and external financing plan.

It has identified M-1 and M-3 motorways, Islamabad Expressway, and Islamabad and Multan International Airports and also requested the Ministry of Communications/NHA and the Aviation Division/Civil Aviation Authority (CAA) to grant necessary permissions to utilize these assets for Ijara Sukuk issuances.

As per the details, the Aviation Division/CAA has not responded however the Ministry of Communications, while assuring its cooperation has asked the Finance Division to consider compensating NHA with an appropriate ‘asset utilization fee’ for its assets which is totally unprecedented.


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In view of the above and the urgent requirement to continue the government’s domestic and international Sukuk programs and the issuance of Islamic NPCs, the Federal Cabinet is requested to permit Finance Division to utilize the above-mentioned assets without any conditionality in terms of compensation or fee, and for the purpose, necessary NOCs will be sought from entities/provincial governments concerned. Valuation of the assets will be updated once these are made available to the Finance Division.



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