Pakistan ready to issue new international Sukuk in October

ISLAMABAD: Pakistan plans to raise up to $ 1.5 billion with an international Islamic bond issue as early as October to bolster finances affected by the coronavirus pandemic, officials said on Monday.

They said the government decided to launch the Sukuk bond to raise $ 1 billion to $ 1.5 billion by pledging asset-backed guarantees from Lahore and Islamabad international airports after repaying $ 1 billion to the ‘expiry of the international obligation next month.

A senior PTI-led government official told The News in substantive discussions that Islamabad will repay $ 1 billion as the principal amount of the Islamic-denominated Sukuk bond on October 13, 2021, upon completion of Its five-year maturity launched the last PML (N) led government in 2016.

“Preparations are underway for the launch of a new Islamic Sukuk bond to generate $ 1-1.5 billion over the next month and a half. The government has approved asset-backed guarantees in the form of three international airports, including Lahore and Islamabad, as well as parts of highways, ”senior official sources confirmed to The News on Monday. The Ministry of Finance has obtained a Certificate of No Objection (NOC) from the Ministry of Aviation and the Ministry of Communications regarding airports and portions of highways to be held as asset-backed collateral to initiate the obligation Sukuk. The government also intends to launch domestic Sukuk in the coming months.

The Federal Cabinet has already granted its approval for the issuance of international bond transactions for a period of 12 months and the Ministry of Justice has also validated that after approval on the basis of the 12-month note program, it does not It was not necessary to seek new approval for the launch of this Sukuk bond. . The finance ministry had estimated the launch of $ 3.5 billion through international bonds, of which the government had so far launched bonds of $ 1 billion in July 2021.

Now the government intends to issue a bond of $ 1 billion to $ 1.5 billion taking into account market appetite by the end of October or beginning of November 2021. The government has also hired the services of four advisers. financial resources to complete this upcoming transaction. “The remaining bonds of $ 1 billion to $ 1.5 billion will be launched in the second half (January-June) of fiscal 2022,” official sources said.

The external account of the Pakistani economy will depend heavily on remittances from abroad, as their failure to materialize would worsen the balance of payments situation. A sharp increase in imports due to rising POL and commodity prices could appear as another major risk.

Pakistan’s current account deficit jumped to $ 2.3 billion in the first two months (July and August) of the current fiscal year 2021-2022, mainly due to a sharp increase in import bills. The State Bank of Pakistan had estimated that the Canadian dollar could hover around 2-3% of GDP, or the equivalent of $ 6-9 billion in the current fiscal year.

The overall repayment of the external debt and the obligation are estimated at 14.7 billion dollars during the current fiscal year 2021-2022. The government will have to repay the external debt and obligations to the tune of $ 830 million to the Paris Club, $ 4.7 billion to the non-Paris Club, $ 2.6 billion to multilateral creditors, $ 4.448 billion to commercial creditors, $ 1 billion on the repayment of bonds and $ 1.068 billion to the IMF.

Increased imports of food products, including wheat, sugar and cotton, consumed $ 8.2 billion in the last fiscal year. The situation has arisen where the government will continue to import such food products in the current fiscal year, with higher prices, so import bills could increase further.

Pakistani policymakers will have to walk a tightrope to stick to the IMF’s agenda as there are strong indications that the government would make ultimate efforts to convince the IMF to have shown a lenient stance in the next one. round of review talks scheduled to kick off. -from September 29, 2021.

The virtual discussions are expected to take place for 10 to 12 days and are expected to be finalized on the eve of the finance minister’s visit to Washington DC to attend the annual meeting of the Breton Wood institutions.

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