Islamabad, 20 January 2022 (TDI): Pakistan has begun the launch of the Sukuk bond worth $1 billion as The International Monetary Fund (IMF) has set a meeting for the 28th of January.

IMF disbursements and the Sukuk Bond are slated to bring in over $2 billion. This will immensely help Pakistan’s dwindling foreign exchange reserves and the depreciating rupee. The IMF’s meeting on the 28th of January will assess Pakistan’s requests for waivers of non-observance of performance criteria and re-phasing of access to IMF funds worth $6 billion.

Over the past five months, Pakistan has completed all five steps it had committed to the fund in a bid to revive its 39-month reform program that was suspended last April. This included the State Bank of Pakistan amendment act by the Parliament of Pakistan and the approval of the mini-budget.

Despite this progress, certain criteria couldn’t reach their completion which has jeopardized the disbursement schedule additionally, tranche size would have to be readjusted for the remaining approved allocation of about $3bn. In total, Pakistan has to repay $8.6 billion at the end of this fiscal year.

The joint managers of the Sukuk bond, Dubai Islamic Bank, Standard Chartered Bank, Credit Suisse, and Deutsche Bank have begun book-building for the transactions and expect to complete it within a week.

Moody’s investors’ services said on Tuesday that it had assigned a B3-backed senior unsecured rating to the proposed US dollar-denominated Sukuk bonds. The B3 rating was due to Pakistan’s large economy and growth potential.

Fitch Ratings maintained sovereign global Sukuk certificates’ rating at B-. This rating is sensitive to any changes in Pakistan’s long term Foreign-Currency Issuer Default Rating (IDR)

Sukuk Bond

Sukuk bond is a sharia-compliant financial certificate. The issuer of the Sukuk sells the investor a certificate and then uses the proceeds to purchase an asset that the investor has direct ownership of. Additionally, the investor must sign an agreement to buy the bond back at par value in the future.