Islamabad, Oct 6 (IANS) Pakistan has issued $1 billion worth sukuk bonds -- Islamic bonds -- returning to the international US dollar sukuk market after a two-year absence, a media report said.
Finance Minister Ishaq Dar announced at a press conference on Thursday that Pakistan has successfully launched the sukuk bonds worth $1 billion after receiving foreign investors' interest worth $2.4 billion, which was almost five times higher than the country's target of $500 million, Dunya news reported.
Sukuk is an Islamic bond that has to be backed by collateral. The five-year bond has been issued at a profit rate of 5.5 per cent, the lowest in the history of Pakistan, "as we never used to sell the bonds below 6 per cent level", Ishaq Dar said.
The rate is lower than the price the country paid two years back for raising $1 billion through the same instrument.
Dar said the bonds have been initially priced at 5.75 percent. The bookings from investors were valued at $2.4 billion.
He said the decision to price the bonds at the lower level was taken in the country's best interests, despite recommendations to the contrary.
The Finance Minister said Pakistan has been achieving all of its economic goals since the past three years. He said the country's growth would be increased by 5 percent this year.
Dar said that at least 124 financial institutions have shown interest while after finalisation of selling of the bonds, 92 institutions bought sukuk while the break was 38 per cent from the European Union (EU), 27 per cent from North America and 27 per cent from Middle-East and seven per cent from Asia.
The bonds will mature in 2021 with 5.5 percent rate of return. The country is expected to receive the one-billion-dollar amount on October 13.
Ishaq Dar expressed hope that the Pakistan's economy would grow by over 5 per cent in the current fiscal year, while the reserves were at comfortable level.
Pakistan is to start investor roadshows for a potential sale of the US dollar-denominated Islamic bonds, aiming to begin the pricing and book-building process next week, the Ministry of Finance has said.
Investor meetings will start on Thursday in the United Arab Emirates before moving to London on Friday and concluding in Boston and New York on Oct. 3 and 4.
Citi, Standard Chartered, Dubai Islamic Bank and Noor Bank of the United Arab Emirates had been appointed to arrange the sukuk issue, banking sources said. Deutsche Bank is also likely to be involved, according to one of the sources with direct knowledge of the deal, The News reported.
Pakistan last raised $1 billion in the sukuk market in late 2014.
The International Sukuk market has been projected to remain subdued due to slowdown in Gulf economies.
Against last year's $62 billion international issuances, international credit rating agencies have recently predicted that transactions in 2016 would remain at almost the same level.
Unlike the Eurobond that was issued without collateral, the government has pledged the Islamabad-Lahore Motorway to raise funds that helped it keep the interest rate below the Eurobond transaction when it raised $500 million in September last year at 8.25 per cent, the Express Tribune reported.
Pakistan's economy grew 4.7 per cent in the last fiscal year, its fastest pace since 2008, rebounding from a series of crises in recent years, helped by low oil prices and the improved security situation, Dunya news reported.
The government has recently embarked on vast infrastructure spending to eradicate energy shortages and Pakistan's debt is rated B3 by Moody's and B- by Standard & Poor's.
