ISLAMABAD-Pakistan on Wednesday successfully returned to the international Sukuk market by issuing the Sukuk bonds worth of $1 billion that would increase the country’s foreign exchange reserves.

“Pakistan successfully returned to the international Sukuk market, with the issuance of US Dollar denominated Sukuk Notes under Reg-S/144a format. The last international Sukuk was issued 9 years ago. The Government was seeking to raise only $500 million. However, the issue received a very high investors’ interest who made subscription of $2.3 billion, which was nearly five times of the target amount. Government decided to accept offers of $1 billion for a 5-year tenure at a profit rate of 6.75pc, which is 50 bps lower than the price at which the 5-year Euro bond was priced in April 2014” said a statement issued by the Finance Ministry here.

The government of Pakistan initiated the process of issuing Sukuk bonds from Monday by holding road shows in Middle East countries followed by road show in London on Tuesday. The government plans to increase country’s foreign exchange reserves to $15 billion by December 31, 2014 through floating $500 million Sukuk bonds and receiving the fourth and fifth tranches amounting to $1.1 billion from the International Monetary Fund (IMF).

Pakistan’s foreign currency reserves stood at $13.228 billion. The government envisaged target to touch $15 billion mark on account of foreign currency reserves till December 31, 2014. Pakistan would eligible for loans from the International Bank for Reconstruction and Development (IBRD) that would enable it to undertake major projects after enhancing its reserves to $15 billion level.

Meanwhile, the Finance Ministry statement further stated that the geographical interest of investors was well distributed with 35pc subscriptions coming from Europe, 32pc from the Middle East, 20pc North America and 13pc from Asia. The order book comprised top quality investors from all parts of the globe.

At the conclusion of the deal, the Finance Minister Senator Ishaq Dar remarked that the success of transaction is a reflection of international investors community’s on the leadership of the Prime Minister Nawaz Sharif and his economic policies. He further stated that the profit rate of 6.75pc compares favourably with the average weighted cost of comparable domestic debt of about 11pc in Pakistan, and will save the country about Rs.5 billion annually in debt servicing. The proceeds of the Sukuk will go to the State Bank and the rupee proceeds of an equivalent amount will be used for retirement of domestic debt.

The dollar proceeds will also help build country’s foreign exchange reserves by enhancing immediately by $1 billion. Senator Dar further added that this will contribute significantly in achieving already declared target of taking the national forex reserves to $15 billion by end-December 2014.
Prime Minister, Nawaz Sharif has congratulated Finance Minister Ishaq Dar on the successful launching/ issuance of Sukuk bonds.