The federal cabinet has rejected the Ministry of Finance summary for placement of F-9 Park Islamabad as asset back guarantee for issuance of Islamic denominated Sukuk bond to fetch $750 million to $1 billion, the reports state.
The finance ministry has been tasked with pledging other assets to guarantee the launch of the Sukuk bond.
The minister for finance along with the secretary of finance made all-out efforts to convince the cabinet colleagues. Perhaps, no one listened to them and rejected the summary for launching the Sukuk bond on the guarantee of F-9 Park.
The Summary of the proposal
The Ministry of Finance in its summary stated that the worth of F-9 Park having an area of 750 acres of land was estimated at Rs900 billion. Therefore, in the case of launching bonds, its rent was provided to buying investors. There is a concept of buying back the asset at the time of maturity of the bond period.
It was a depressing moment for Finance Ministry high-ups who are responsible for managing the fiscal affairs of the country. They argued that the Islamic Sukuk bond was a cheaper mode of financing. As if this bond was not launched then Pakistan will have to manage financing for the budget deficit at 70 basis points higher through domestic T-bills.
A top official said:
“You as media persons are also responsible for this rejection of summary because you all have created media hype and today the cabinet did not listen to our arguments”.
Moreover, they said that they wasted nine months to reach a stage for the issuance of the Sukuk bond. The market possessed liquidity and there is ample chance to get an attractive deal at this juncture, they further added.
Agenda behind the issuance of Sukuk bonds
The Finance Ministry told the cabinet that the public debt went up by Rs11,000 billion in the last two years. As it increased by Rs6,000 billion because of interest payments, Rs3,000 billion in the wake of devaluation, Rs1,000 billion after an outbreak of COVID-19 pandemic, and Rs1,000 billion under the present regime.
It is a misleading statement before the cabinet as the total debt and liabilities increased from around Rs29 trillion to Rs44.5 trillion. This increase occurs in the last two fiscal years as shown by the data of the State Bank of Pakistan.
The Ministry of Finance also stated that Sukuk promotes Islamic banking finance in the country, which is a constitutional obligation. The government of Pakistan has issued Sukuk several times before.
Sukuk- An Islamic way out
The Sukuk market is growing rapidly around the world. Till the close of 2019, Sukuk worth $1,247 billion has been issued globally. Malaysia has been the global leader in the Sukuk market. Other important issuers are Saudi Arabia, UAE, Qatar, Oman, Jordan, Turkey, Morocco, and Indonesia.
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