Govt plans Rs100 billion Sukuk boost at PSX

The government is set to hold the second auction of Sukuks at the Pakistan Stock Exchange (PSX) on Tuesday, aiming to raise new domestic debt worth Rs100 billion after securing financing at a comparatively low price in the first auction held last month at the bourse. The government has decided to gradually increase the number of auctions of its bonds through PSX, considering that investors – both institutional and individual – have significant funds at their disposal to lend to the government. The ample liquidity helps the cash-strapped government raise new debt at a lower cost. An analyst estimated the other day that an increase or decrease in the interest rate on the country’s debt is costing the government Rs200-250 billion a year. While talking to The Express Tribune, a joint financial and Shariah-compliant adviser to the issue, Meezan Bank Senior Executive Vice President and Head of Shariah Compliance, Ahmed Ali Siddiqui, estimated “the government may raise the new financing at a rental payment (rate of return) in the range of 16-19%, which is significantly lower than the central bank's benchmark policy rate at 22%.”