In a first, the government on Tuesday raised Shariah-compliant debt worth close to
In a couple of days, the government will provide the raised financing to energy firms - like
This is for the first time in history that the government has used the PSX platform to raise funds. It helped the government acquire financing at a comparatively lower rate of return as a significantly higher number of financial institutions and rich individual investors participated in the bidding. The rate of return is 90 basis points lower than the return on debt, which the government last year raised directly from seven to eight Islamic banks in a bid to reduce the circular debt.
The government will pay the profit on fresh debt to lenders at Karachi Inter-bank Offered Rate (Kibor) minus 10 basis points twice a year. The debt has been raised for 10 years.
'The lower rate of return will save the government around
A total of 334 corporate entities, including 190 non-banking entities, participated in the two-day (
The government floated the first Pakistan Energy Sukuk (PES-I) worth
The government may provide the funds on the same or next day (Thursday) to the energy firms. PES-II would be listed at the PSX on Thursday and its units would be available for trade By: investors through the stock market's online trading platform, the banker said.
Anyone, including foreign investors, may buy and sell the units, the PSX said in a statement. 'The acquisition of fresh debt will save the government billions of rupees as it has been paying, or has agreed to pay, interest on the circular debt at a rate of Kibor plus 3-4% per month,' the banker added.
'This would prove to be the first of many more public sector debt issues to be routed through the capital market, By: adopting a transparent process,' he added.
The circular debt has continued to swell despite the government's claims of controlling it and raising power tariff multiple times to collect more from the consumers paying their electricity bills regularly.
PSX MD Farrukh H Khan said in the statement 'this Sukuk issue, for the first time undertaken through book-building in
The book-building process has helped PHL to discover the best possible price through the standardised methodology in line with international best practices. 'This will increase the investor base, liquidity, and secondary market trading of the Sukuk, enabling the government to borrow at the most competitive rates,' he said.
PES-II is 100% SLR eligible, meaning banks may use it to meet SLR limits under the banking rules governed By: the
The PSX statement said unlike the Sukuk-I issuance last year, investors who participated in the latest issue included banks, financial institutions, companies or corporate bodies (as per Companies Act 2017), mutual funds, voluntary pension schemes, private funds being managed By: NBFCs, insurance companies, securities brokers, funds and trusts (as defined in the
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