KARACHI: The State Bank of Pakistan (SBP) has reported that the government raised Rs76.38 billion through auction of the five-year Government of Pakistan Ijarah Sukuk on Thursday.
The auction target for the Islamic bond had earlier been set at Rs75 billion. The offered amount was Rs190 billion.
Out of the total accepted bids, the amount of competitive bids accepted stood at Rs66.190 billion, while non-competitive bids amount was recorded at Rs10.194 billion.
The cut off margin was set at 125 basis points under the benchmark, applicable on all accepted bids.
This latest auction is part of the government’s plan to raise Rs225 billion over the next three months. The second auction is to be held on May 16, with a target of Rs75 billion; the third auction is set for June 18, also for Rs75 billion.
The SBP will be issuing the government of Pakistan sovereign Sukuk based on ‘Ijarah’, a technical Islamic term that means ‘to give something on rent’, against the Jinnah International Airport Terminal for five years.
In doing so, the central bank said it wanted to achieve the twin objectives of stimulating trading in Shariah-compliant debt securities, and help plug the budget gap amid the spread of COVID-19 in Pakistan.
Earlier in April, the federal cabinet approved issuing the Sukuk bond to generate close to Rs700 billion for budget deficit financing, particularly to combat COVID-19.
The issuance also helps with general SBP efforts to regulate and improve investment options for the growing Islamic banking industry.
An earlier Moody’s report said domestic sovereign Sukuk issuance was considerably less than demand, forcing Islamic banks to use their excess liquidity elsewhere. The availability of Sukuk instruments, therefore, would help Islamic banks manage their liquidity.
The Sukuk was first issued in Pakistan in 2008, as a liquidity management avenue for the domestic Islamic industry.
