The government through the Ministry of Finance is all set to conduct an auction of Rs. 100 billion for sovereign Sukuk at the Pakistan Stock Exchange (PSX) on January 23, 2023.
The ministry will auction 5 Sukuks of 1 year, 3 years and 5 years tenures to retail and institutional investors at the PSX against Islamabad International Airport as an asset having a total value of over Rs. 203 billion for its building, infrastructure, and land (Total Area: 26,313 Kanals and 4 Marlas).
According to the PSX, the latest auction to be conducted on Tuesday Jan 23, 2024, has 5 Sukuk offerings A- 1-year Ijarah Sukuk (fixed rate) B- 3-year Ijarah Sukuk (both fixed and variable rates) C- 5-year Ijarah Sukuk (both fixed and variable rates) 1-year Sukuk will be issued using discount methodology while the 3 and 5 year Sukuk will be issued at Face Value.
The rental rate will be determined based on the auction results. Meezan Bank Limited is the joint financial advisor and Shariah Advisor of the issue along with Dubai Islamic Bank, Bank Alfalah Islamic, and BankIslami Pakistan Limited.
Recently, the government received an overwhelming response at PSX for the successful auction of 1 year sovereign Sukuk of Rs. 30 billion in December 2023. This issue was oversubscribed by more than 12 times.
Besides the more-than-expected response, the government was able to raise the Shariah complaint fund at 3% less than the policy rates (22%), hence the minister has decided to offer more Sukuk offerings at PSX, saving the borrowing cost. Security and Exchange Commission of Pakistan (SECP) and Central Depository Company of Pakistan Limited, NCCPL and PSX are actively working with the ministry to conduct yet another historic Sukuk launch at Pakistan Stock Exchange Limited.
The overall total Sukuk issuance in Pakistan has reached over Rs 5 trillion and the government has also saved a significant amount in terms of financing cost when compared to interest-based T-Bills and PIBs. The increasing trend to issue Sukuks is a step from the government to comply with the verdict of the Federal Shariat Court decision stating to move away from interest-based borrowing.
It is hoped that this strategy of increasing Shariah-compliant financing to replace the conventional loans of the government will contribute to economic development, financial inclusion, and growth of Islamic finance in the country.