ISLAMABAD: The government gave a go-ahead for the issuance of Sukuk bond to raise Rs200 billion funds from Islamic banks for the payment of circular debt.
The decision to issue Sukuk bond for partial payment of the circular debt was taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet. Finance Minister Asad Umar chaired the ECC meeting.
The meeting also formally allowed the power division of the energy ministry to proceed with the raising of Rs200bn Syndicated Islamic Term Finance Facility from Islamic banks against already approved term sheets for cash settlement of the circular debt.
Power Secretary Irfan Ali told the meeting that the total circular debt as of Dec 31, 2018 stood at Rs1.415 trillion. This included old stock of Rs607bn against which syndicated term finance facilities had already been executed on behalf of the Power Holding Company Ltd (an asset-less shell company of the power division), besides the remaining and fresh build-up payables of Rs808bn.
The finance ministry and a consortium of six banks have already finalised the funding arrangement and repayment mechanism. The consortium is led by Meezan Islamic Bank and comprises Bank Islami Pakistan, Faysal Bank Limited, MCB Islamic Bank, Dubai Islamic Bank and Al-Baraka Bank. The financing is statutory liquidity ratio (SLR) eligible product and assets of the distribution companies and generation companies would remain pledged with the banks as collateral, besides the government guarantee. The boards of generation and distribution companies are reported to have formally approved the funding and mortgage of assets.
The bond will have a 10-year maturity at a rental return of a base rate plus a margin of 100 basis points and Takaful cost. The base rate will be defined as six-month Karachi Interbank Offered Rate (Kibor) asking side prevailing on the base rate setting date, subject to a floor and cap.
Dear TNT Reader,
At The News Tribe, our mission is to bring you free, independent, and unbiased news and content that keeps you informed and empowered. We are committed to upholding the highest standards of journalism, as we understand that we are a platform for truth.
Apart from independent global news coverage, we also commit our unique focus on the Muslim world. In an age marked by the troubling rise of Islamophobia and widespread misrepresentation of Muslims in Western media, we strive to provide accurate and fair coverage.
But to continue doing so, we need your support. Even a small donation of 1$ can make a big difference. Your contribution will help us maintain the quality of our news and counteract the negative narratives that are so prevalent.
Please consider donating today to ensure we can keep delivering the news that matters. Together, we can make a positive impact on the world, and work towards a more inclusive, informed global society.
Donate Monthly Subscription Annual Subscription
