Pakistan’s central bank is seeking bids for five-year Islamic bonds worth a total of Rs. 100 billion, as reported by a national daily.
The State Bank of Pakistan circulated a tender to invite bids for the Government of Pakistan Ijara Sukuk on Monday. The five-year bond is backed against three highways – the M-3 (Lahore–Abdul Hakeem), the M-5 (Punjab Portion), and the M-5 (Sindh Portion).
The bank aims to raise Rs. 25 billion on a fixed rental rate and Rs. 75 billion on a variable rental rate. The auction date for the bond is 26 October and the settlement date is 29 October.
This auction is part of government’s policy to raise money for budgetary support from the Islamic banking sector. It already utilizes the conventional banking sector to raise funds through Pakistan Investment Bonds and Treasury Bills.
Financial sector analysts say that the government will issue similar tenders in the near future, as part of its strategy to use both conventional and Islamic banking tools to meet the budgetary requirements. It has set a target of Rs. 1.2 trillion to raise funds via the issuance of Ijara Sukuks in its current fiscal year budget.
A market analyst while commenting upon the issue said, “Presently, the Islamic banking sector possesses around Rs. 3.8 trillion deposits, which is 19 percent of the almost Rs. 20 trillion total banking deposits of the banking sector”.
“Islamic banks have been pressing the SBP to issue Ijara Sukuk to deploy the huge deposits under their belt,” she added.
Islamic bonds are sharia-compliant financial instruments that involve direct asset ownership interest.
