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Govt to float bonds to raise Rs1.8tr by pledging major airports and road networks

muhammadhafeezmalik

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Govt to float bonds to raise Rs1.8tr

Seeks cabinet’s approval to pledge major airports and road network as collateral

The government has sought permission of the federal cabinet to pledge the country’s major airports and road network to raise around Rs1.8 trillion worth debt in the next fiscal year to finance budget deficit and at the same time save some interest cost.
In its revised list of assets that the Ministry of Finance wants to give in collateral to international and domestic lenders, the government has dropped Fatima Jinnah Park, Islamabad. But three motorways, three international airports and Islamabad Expressway have been added in the list, said sources in the Ministry of Finance.

The finance ministry has placed a request before the federal cabinet that in order to support the government’s budgetary position and promote Islamic banking industry it intends to issue Ijara Sukuk in the domestic and international markets.

The federal cabinet will take a decision today (Tuesday). The asset-backed borrowings carry relatively less cost compared with conventional debt.

The finance ministry has requested the cabinet that there is an urgent need to identify new unencumbered assets to ensure uninterrupted issuance of Ijara Sukuk in the domestic as well as international capital markets. The debt raised through the Sukuk bonds, which are backed by the government’s assets, costs relatively less than the conventional bonds.

The federal cabinet had directed in January this year to identify options of underlying assets for Sukuk issuances.

The Ministry of Finance has identified M-1 (Islamabad-Peshawar) and M-3 (Pindi-Bhatian-Faisalabad) motorways, Islamabad Expressway and Islamabad, Lahore and Multan international airports. It also wants to pledge the only remaining section of the Lahore-Islamabad motorway to borrow from the lenders, said the sources. At present Islamabad-Chakwal section of M2 Motorway is unencumbered and the rest of the motorway has been pledged against the debt. The M1 and M3 are also free of any charges.

The finance ministry had requested the National Highway Authority (NHA) and Civil Aviation Authority (CAA) to grant no objection certificates to utilise these assets for raising debt.

The CAA has not yet responded while the NHA has demanded compensation for using its assets to raise debts. The Ministry of Finance has requested the federal cabinet that it may be given permission to pledge these assets without payment of compensation to any of the departments.

Although, the government has not yet updated the revised valuation of these assets, the finance ministry has assessed their value at Rs2.2 trillion on the basis of old valuations and some latest estimates in case of airports.

The sources said that the Ministry of Finance plans to raise Rs1.76 trillion worth debt through issuance of domestic and foreign Islamic bonds. This includes $3.5 billion or Rs560 billion foreign Sukuk.

The finance ministry has estimated the value of Lahore airport at Rs980 billion or $6.1 billion, Islamabad International Airport Rs230 billion or $1.4 billion and Multan airport Rs320 billion or $2 billion.

The value of Islamabad Expressway is estimated at Rs470 billion or $3 billion.

The finance ministry sources said that the Jinnah International Airport, Karachi, has already been exhausted and the government has raised over Rs700 billion worth debt by giving the airport in collateral.

So far, the Ministry of Finance has conducted 32 domestic Sukuk transactions worth Rs1.6 trillion and four international Ijara Sukuk to raise $3.6 billion.

The Pakistan Peoples Party (PPP) government (2008-13) conducted 14 Sukuk transactions and raised Rs501.5 billion debt through Sukuk bonds by pledging various assets. The Pakistan Muslim League-Nawaz (PML-N) government (2013-2018) raised Rs435 billion debt through five Sukuk transactions.

The official record showed that the Pakistan Tehreek-e-Insaf (PTI) government in the past two-and-a-half years already conducted 12 Sukuk transactions and raised Rs762 billion debt. The pace and quantum of borrowing has increased during the tenure of the PTI government due to ever-widening budget deficit, the official documents revealed.




 

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Govt to float bonds to raise Rs1.8tr

Seeks cabinet’s approval to pledge major airports and road network as collateral

The government has sought permission of the federal cabinet to pledge the country’s major airports and road network to raise around Rs1.8 trillion worth debt in the next fiscal year to finance budget deficit and at the same time save some interest cost.
In its revised list of assets that the Ministry of Finance wants to give in collateral to international and domestic lenders, the government has dropped Fatima Jinnah Park, Islamabad. But three motorways, three international airports and Islamabad Expressway have been added in the list, said sources in the Ministry of Finance.

The finance ministry has placed a request before the federal cabinet that in order to support the government’s budgetary position and promote Islamic banking industry it intends to issue Ijara Sukuk in the domestic and international markets.

The federal cabinet will take a decision today (Tuesday). The asset-backed borrowings carry relatively less cost compared with conventional debt.

The finance ministry has requested the cabinet that there is an urgent need to identify new unencumbered assets to ensure uninterrupted issuance of Ijara Sukuk in the domestic as well as international capital markets. The debt raised through the Sukuk bonds, which are backed by the government’s assets, costs relatively less than the conventional bonds.

The federal cabinet had directed in January this year to identify options of underlying assets for Sukuk issuances.

The Ministry of Finance has identified M-1 (Islamabad-Peshawar) and M-3 (Pindi-Bhatian-Faisalabad) motorways, Islamabad Expressway and Islamabad, Lahore and Multan international airports. It also wants to pledge the only remaining section of the Lahore-Islamabad motorway to borrow from the lenders, said the sources. At present Islamabad-Chakwal section of M2 Motorway is unencumbered and the rest of the motorway has been pledged against the debt. The M1 and M3 are also free of any charges.

The finance ministry had requested the National Highway Authority (NHA) and Civil Aviation Authority (CAA) to grant no objection certificates to utilise these assets for raising debt.

The CAA has not yet responded while the NHA has demanded compensation for using its assets to raise debts. The Ministry of Finance has requested the federal cabinet that it may be given permission to pledge these assets without payment of compensation to any of the departments.

Although, the government has not yet updated the revised valuation of these assets, the finance ministry has assessed their value at Rs2.2 trillion on the basis of old valuations and some latest estimates in case of airports.

The sources said that the Ministry of Finance plans to raise Rs1.76 trillion worth debt through issuance of domestic and foreign Islamic bonds. This includes $3.5 billion or Rs560 billion foreign Sukuk.

The finance ministry has estimated the value of Lahore airport at Rs980 billion or $6.1 billion, Islamabad International Airport Rs230 billion or $1.4 billion and Multan airport Rs320 billion or $2 billion.

The value of Islamabad Expressway is estimated at Rs470 billion or $3 billion.

The finance ministry sources said that the Jinnah International Airport, Karachi, has already been exhausted and the government has raised over Rs700 billion worth debt by giving the airport in collateral.

So far, the Ministry of Finance has conducted 32 domestic Sukuk transactions worth Rs1.6 trillion and four international Ijara Sukuk to raise $3.6 billion.

The Pakistan Peoples Party (PPP) government (2008-13) conducted 14 Sukuk transactions and raised Rs501.5 billion debt through Sukuk bonds by pledging various assets. The Pakistan Muslim League-Nawaz (PML-N) government (2013-2018) raised Rs435 billion debt through five Sukuk transactions.

The official record showed that the Pakistan Tehreek-e-Insaf (PTI) government in the past two-and-a-half years already conducted 12 Sukuk transactions and raised Rs762 billion debt. The pace and quantum of borrowing has increased during the tenure of the PTI government due to ever-widening budget deficit, the official documents revealed.




Sukuk bonds (Islamic bonds) share is increasing instead of normal instruments. This is a good sign as it a more cost effective way of raising capital.

Pace and quantum of borrowing will increase because interest payment is increasing ( largest head of fisical defict). This is not primarily due to governemnt spending ( primary surplus/deficit).
 

muhammadhafeezmalik

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Sukuk bonds (Islamic bonds) share is increasing instead of normal instruments. This is a good sign as it a more cost effective way of raising capital.

Pace and quantum of borrowing will increase because interest payment is increasing ( largest head of fisical defict). This is not primarily due to governemnt spending ( primary surplus/deficit).
If skuk bonds are better than other modes of borrowing why PTI was criticising PMLN on full throttle??
 

muhammadhafeezmalik

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ok pti wouldnt. Ask your leader bhagora nawaz sharif to return looted money if you cant dont try to play innocent.
And join the inquiry about Model Town too. Hang him and take the looted money. I have no objection but first you have to prove from which project he had "looted" the money, No?? What happened to the report commission about debt of last ten years??

Maybe because plmn decided to run a media campaign when pti issued sukuk while ignoring they did the same. I remember the uproar when the financial experts came in and educated the masses.
I was expecting a better logic from you.
 

AZ1

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And join the inquiry about Model Town too. Hang him and take the looted money. I have no objection but first you have to prove from which project he had "looted" the money, No?? What happened to the report commission about debt of last ten years??



I was expecting a better logic from you.
haha pretending innocent. let bhagora come back if he ever comes back.
 

Hareeb

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If skuk bonds are better than other modes of borrowing why PTI was criticising PMLN on full throttle??
Sukuk are asset backed securities; the holder (investor) will have claim to earnings through partial ownership, so Sukuk being asset backed sec, have less cost.
In addition, generally bonds those float in international markets have less cost of debt than commercial loans. Moreover, sovereign bonds usually have less cost than other (corporate, semi-govt, municipal etc) bonds depending on credit rating of country.

PTi criticized PMLN because previous govt floated short term bonds (to raise $500m) at high interest rates of more than 8%. Generally, such high yields are asked by investors as premium for long term bonds due to uncertainty.
 

muhammadhafeezmalik

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Sukuk are asset backed securities; the holder (investor) will have claim to earnings through partial ownership, so Sukuk being asset backed sec, have less cost.
In addition, generally bonds those float in international markets have less cost of debt than commercial loans. Moreover, sovereign bonds usually have less cost than other (corporate, semi-govt, municipal etc) bonds depending on credit rating of country.

PTi criticized PMLN because previous govt floated short term bonds (to raise $500m) at high interest rates of more than 8%. Generally, such high yields are asked by investors as premium for long term bonds due to uncertainty.
Can you share more details when short term (less than 5 years) sukuk bonds were issued by PMLN @ 8%?

1624359005595.png


It was PTI government who raised bonds at more than 8%

1624359347617.png
 

hydrabadi_arab

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This way interest rate is lower. Govt will pay Rs3 Trillion in debt services this year. As long as debt ratio per GDP is going down all is well.
 

HRK

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why PTI was criticising PMLN on full throttle??
because it was PML-N who increased the deficit both fiscal and CAD to such extent and then to address the deficit arranged finance by issuing high rates international bound .... and If I remember correctly [i have forget the details it happened when Ishaq Dar Finance Minister] one such transaction was made at 8% rate in USD while bonds issued by other countries were less than 5%

Ishaq Dar was THE REAL ECONOMIC HIT MAN in Pakistan.
 

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