The government has raised Rs46.44 billion through the issuance of Ijarah Sukuks under the new series launched in October 2022 to finance the budget deficit and promote Shariah-compliant banking in Pakistan.
Meezan Bank Senior Executive Vice-President and Head of Shariah Compliance, Ahmed Ali Siddiqui said, “Under the new series, the government has started issuing Ijarah Sukuk bonds against the assets of the National Highway Authority.” The Ijarah Sukuks are Shariah compliant bonds. The government issues the Sukuk to Islamic institutions which generate income by renting out the assets to the government.
The latest rental Sukuk is a variable bond issued for a period of five years. Meezan Bank along with Dubai Islamic Bank and Al Falah Islamic Bank led the latest transaction as joint financial advisors to the Ministry of Finance.
“The government may issue Sukuk worth around Rs600 billion against the NHA assets over the next few months,” estimated Siddiqui. As “the government has targeted issuing Sukuk bonds worth around Rs1 trillion in the current fiscal year 2023,” it may identify new assets to issues more Sukuks in the next series later on.
The ministry of finance has issued Sukuks worth Rs160 billion in the current fiscal year started July 1, 2022, including the latest one worth Rs46.44 billion. Under the previous series, in the prior six months (April – September 2022), the government issued Sukuks worth Rs624 billion against Civil Aviation Authority’s (CAA) assets, including Karachi, Lahore and Islamabad airports.
So far, the government issued the Shariah-compliant bonds worth Rs3.7 billion, including the one that matured, since the first Sukuk issued in 2008 in Pakistan. It was learnt that the outstanding amount of Sukuks in place are estimated to be around Rs2.44 trillion. The outstanding worth of Sukuk stands equivalent to a little over 12% of the domestic debt raised from local banks.
The rest of the slightly less than 88% (Rs17.48 trillion) debt was raised through conventional banks. About a year ago, the government targeted raising debt from banks to 10% from Shariah compliant banks in its medium-term strategy. —Agencies