The government has achieved a financial milestone by successfully generating an impressive sum of Rs. 371 billion, equivalent to over $1.29 billion, through the issuance of GOP Ijarah Sukuk linked to the Islamabad Expressway project.
This achievement not only signifies the highest value of Sukuk ever issued in a single auction since the initiation of the GOP Ijarah Sukuk program back in 2008, but it also substantially elevates the cumulative value of Sukuk issued to an impressive Rs. 3.5 trillion.
During the recent auction, multiple banks participated actively, with six distinct denominations of Sukuk available for bidding. These denominations encompassed 1, 3, and 5 Year Fixed Rate Sukuk, as well as 1, 3, and 5 Year Variable Rate Sukuk, providing a diversified range for investors.
Although the initial target set by the government for the auction was Rs. 240 billion, the response exceeded all expectations.
The Sukuk received bids totaling over Rs. 508 billion (approximately $1.77 billion), surpassing the target by more than 200%. Eventually, Sukuk worth Rs. 371 billion were issued across five denominations, with bids for the 5 Year Fixed Rate denomination being rejected due to this overwhelming response.
The rental rates associated with these Sukuk varied based on their duration, ranging from 18.49% to 23.62% per annum. These rental payments will be made semi-annually, and the Sukuk will reach maturity upon redemption.
The underlying asset for this Sukuk issuance was the Islamabad Expressway, and the transaction employed an Ijarah Sale and Lease Back structure, which was meticulously approved by the Shariah Advisory Committee of the State Bank of Pakistan. This transaction was made possible through the collaborative efforts of Meezan Bank Limited, Dubai Islamic Bank Pakistan Limited, and Bank Alfalah Limited, serving as Joint Financial Advisors.
The increased participation of banks in Sukuk issuance serves a dual purpose – it enhances the profitability of Islamic banks while also allowing the government to raise capital for various projects or expenses at relatively lower profit rates, creating a win-win scenario.