The State Bank of Pakistan (SBP) Thursday announced the auction for three-year Government of Pakistan (GoP) Ijara Sukuk on Bai Muajjal basis. Industry sources said the government of Pakistan Ijara Sukuk (GIS-16) worth Rs 108 billion is being matured on December 18, 2018, therefore in order to manage the liquidity of the Islamic banks and avoid repayment of the previous borrowed amount, the federal government has decided fresh auction of GIS-16.
According to the announcement, in accordance with the SBP directives, tenders have been invited for Purchase of GoP Ijara Sukuk by Government of Pakistan on deferred payment (Bai Muajjal basis) from all Islamic Banks & Islamic Banking Branches.
Bids have been invited in sealed envelopes on December 14, 2018 by the Director, Domestic Markets & Monetary Management Department. The target for the Ijara Sukuk auction has been fixed at Rs 111 on Bai Muajjal basis for a period of 3-year.
Effective liquidity management is the key challenge for Islamic banking industry of Pakistan as they have limited avenues of investment despite sufficient liquidity. This issue has gained more prominence owing to factors such as dearth of Shariah-compliant investment opportunities, limited availability of Shariah-compliant money market instruments and absence of Shariah-compliant SBP standing facility.
In Pakistan, sovereign Sukuk being issued since 2008 provide the key liquidity management avenue to the domestic industry, however, demand for such instruments far surpasses their supply. Being cognizant of this challenge, the SBP, in consultation with banking industry is working out alternative solutions for liquidity management for Islamic banking industry. The government is also planning to raise up to Rs 300 billion through Sukuk by the end of December 2018 to manage the power sector circular debt.
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