Pakistan issued the 7-year tenor asset-backed Sukuk bond to raise $1 billion at an interest rate of 7.95%. This rate of interest is the highest ever pledged by cash-strapped Pakistan, in its history, on an Islamic bond. Pakistan has also agreed to pledge a portion of the Lahore-Islamabad Motorway in return for this loan.
According to the Ministry of Finance, this loan is being raised to keep the official foreign exchange reserves at their levels ahead of some major foreign loans’ repayments.
The Pakistani government took this move after it consumed around $2 billion out of the $3 billion borrowed from Saudi Arabia one-and-half months ago, which brought down the gross official foreign exchange reserves to $17 billion as of January 14.
The rate of interest of Islamic Sukuk is much higher than that of Eurobond that the government had floated in April last year. Although Islamic Sukuk is backed by an asset that attracts less interest rate than Eurobond, the government is paying a much higher rate than traditional tenor bonds.