SBP raises Rs75bn from Sukuk auction

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KARACHI: The State Bank of Pakistan (SBP) has reported that the government raised Rs74.617 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 Rs114.49 billion.

Out of the total accepted bids, the amount of competitive bids accepted stood at Rs73.46 billion, while non-competitive bids amount was recorded at Rs1.157 billion.

The cut off margin was set at 10 basis points under the benchmark, applicable on all accepted bids.

Previously on April 23, the government raised Rs76.38 billion through an auction of the Islamic bond. In that case, the auction target had been set at Rs75 billion, while the offered amount was Rs190 billion. The next auction is set for June 18, also for Rs75 billion, while another auction, also for Rs75 billion is to be held on July 23.

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 has previously 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.

1 COMMENT

  1. This is a good initiative. It will stabilize the rate of return on inter-bank funds, will stabilize bank’s profitability, will stabilize payment on deposits of account holders, will provide funds to govt with comparable low rates, and will stabilize money flow in economy.

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