Government launches $500 million in Islamic bonds

Published: September 28, 2016

The government is set to launch $500 million in Islamic bonds to raise money for its foreign exchange reserves, a senior official said Wednesday, as a three-year IMF bailout package nears a close.

The government has started looking at key markets for the “Sukuk” bonds — a Sharia compliant instrument that offers profits instead of interest to its subscribers, a top official said.

“We have begun the roadshow in Dubai today and will go to London, Boston, and New York in the same leg,” finance secretary Waqar Masood Khan told AFP.

ECC waives 10 types of taxes on Islamic bonds

The announcement comes as a three-year, $6.6-billion-dollar bailout package from the International Monetary Fund (IMF) comes to an end.

The lender announced in August it would soon release the last instalment, worth $102 million.

Khan said the country needs to tap the global capital market to maintain its foreign exchange reserves, which currently stand at $22.69 billion, enough to cover import bills for five months.

“The purpose of the issuance of Sukuk bonds is to meet our growing future demand of the forex,” he said.

“After the IMF package is over and amid falling exports, Pakistan needs to raise the funds from different sources,” Rehan Ateeq, head of research at Shajar Capital added.

The move also comes as $1 billion worth of 10-year Eurobonds draws to a close.

“We expect with the maturity of IMF loan as well as the Eurobond, the government would come up with more such bonds soon,” Ateeq said.

Pakistan has so far issued Eurobonds and Sukuk worth $4.05 billion. It expects its economy to grow at 5.5 percent in the the current fiscal year, compared to 4.7 percent growth in previous.

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Reader Comments (2)

  • Nirvana
    Sep 29, 2016 - 1:49AM

    stop seeing Pakistan through the lenses of the racist media. Just to add a little to your
    knowledge about Pakistan – Pakistan Stock Market is one of the best Asian stock markets in the world since last 5 + years. An investor who went long on PSX in 2013 has already realized 350% returns (Google to verify)!!Recommend

  • bogus
    Sep 29, 2016 - 3:36AM

    Normal Euro bonds ended up costing an outrageous amt (aka wrong end of junk bond spectrum) – can you imagine what the actual yield of these Islamic bonds are going to be? (smaller market in economy when wealthy Muslims are adjusting to new economic reality). i bet nobody will ever disclose the effective yield of this bond issue. Every country/person has a limit on how much credit a normal creditor will extend… Pakistan has already exceeded that and promoting Islamic Bonds is a good sign that other markets are effectively closed off. Time to increase taxes or cut down spending … just like the rest of the World. Recommend

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