Govt to raise Rs90bn through first ever Ijara sukuk

Pakistan Stock Exchange (PSX) to Conduct First-Ever Auction of Government Sukuk Bonds

Islamabad, December 7, 2023 – The Pakistan Stock Exchange (PSX) is set to host the inaugural auction of listed government sukuk bonds on December 8, 2023, as announced in a notice released by the exchange. This auction is a pivotal part of the government’s strategy to generate Rs90 billion in funds through the sale of one-year Islamic bonds between December 2023 and February 2024. These sukuk bonds adhere to the principles of Shariah-compliance, particularly the concept of Ijarah, which involves the leasing of assets.

The auction will be conducted via the Capital Market Infrastructure Institutions (CMIIs), comprising the PSX, the National Clearing and Settlement Company of Pakistan (NCCPL), and the Central Depository Company of Pakistan (CDC). Recent amendments to the rules governing the issuance, registration, trading, and transfer of government debt securities through CMIIs, approved by the Ministry of Finance, have empowered the PSX to oversee the primary market issuance.

The introduction of government sukuk bonds is expected to attract investors seeking Shariah-compliant investment options, diversify the government’s sources of financing, and contribute to the development of the Islamic capital market in Pakistan.

The first auction for government sukuk bonds is scheduled for December 8, 2023, with a target of Rs30 billion and settlement on December 11, 2023. The second auction will follow on January 23, 2024, with the same target of Rs30 billion and settlement on January 24, 2024. The third and final auction is slated for February 2024, targeting Rs30 billion in funds, with settlement occurring on the same day as the auction date.

It’s worth noting that the auction dates and targets may be subject to adjustments based on market conditions and the government’s borrowing requirements.

One notable feature of this initiative is its inclusivity, allowing everyday individuals to directly invest in T-bills and PIBs (Pakistan Investment Bonds) with even modest sums of capital. This move is expected to stimulate increased trading volumes at the stock exchange, driven by both institutional and public interest in investing in sovereign debt securities.

Approximately 200 stockbrokers and 30-40 banks are anticipated to actively participate in the sale and trading of these debt securities. High-net-worth investors also have the option to engage in these investments through specific banks, further enhancing accessibility to these sukuk bonds.