Sukkuk against M-2 assets: Dar given blanket approval

Finance Minister Senator Ishaq Dar has obtained blank approval of the Economic Co-ordination Committee (ECC) of the Cabinet regarding size, maturity and pricing for proposed Pakistan International Sovereign Sukuk, 2016 against assets of Lahore-Islamabad Motorway.

A summary was moved by the Finance Division to the Economic Co-ordination Committee (ECC) of the Cabinet presided over by Finance Minister Ishaq Dar on Friday for taking approval to authorise Finance Minister to decide about the size, maturity and pricing of the proposed Sukuk.

Giving the background of issuance of Sukuk, 2016, the sources said that in order to further bolster the foreign exchange reserves and stabilise balance of payments position, it has been decided with the approval of the Finance Minister in August, 2016 to raise fresh financing from the international capital markets by floating an International Sukuk, 2016 against the underlying asset of Lahore-Islamabad Motorway (M-2).

To accomplish the above objective, Finance Division invited financial and technical bids from national and international banks for appointment of lead managers for the Sukuk transaction.

For the purpose, the advertisement was published in international and national newspapers. In response the following banks submitted their bids: (i) Citibank;(ii) Standard Chartered Bank;(iii) Noor Bank;(iv) Dubai Islamic Bank;(v) Deutsche Bank and ;(vi) Bank Alfalah.

The sources further stated that the technical and financial proposals of the banks were considered by a committee comprising Additional Finance Secretary (EF), Joint Secretary (EF), Finance Division, Joint Secretary (Budget), Finance Division, Director General (Debt), Finance Division, Co-ordinator (Budget), Finance Division and two representatives from State Bank of Pakistan.

Based on the recommendations of the committee, a consortium of banks comprising of Citibank, Standard Chartered Bank, Noor Bank, Dubai Islamic Bank and Deutsche bank was appointed as lead manager on September 21, 2016 to prepare necessary Sukuk documents and execute the transaction.

The sources said, ECC was requested to allow the Finance Division to issue sovereign Sukuk in the international capital markets and for this purpose, authorise the Finance Minister to decide the size, maturity and pricing of the proposed Sukuk issue.

The ECC was also requested to allow the Federal Government to grant exemption under Clause 75 of the Second Schedule of the Income Tax Ordinance, 2001 from tax on any income derived from profit in respect of the Sukuk certificates.

The ECC gave a blanket approval to the Finance Minister for size, maturity and size of the proposed Sukuks to be issued during this year.

The ECC also approved a summary moved by the Ministry of Water and Power for allowing NTDC (National Transmission and Despatch Company Limited) to approach NEPRA for approval of extension of tariff from 1st January 2016 to 31st December 2016 for a contract with TAVANIR Iran for the purchase of 74MW.

On a summary moved by the Finance Division, ECC gave approval to HBL (Habib Bank Limited) to open a bank branch in Urumqi, China.

The ECC approved a summary of the Ministry of Water and Power for issuance of a policy directive to NEPRA to allow 1 percent of the capital cost net of power projects under the China-Pakistan Economic Corridor and US $150,000/- amount on account of security to be distributed annually starting from the construction period till the term of the Power Purchase Agreement (PPA).

The ECC reviewed Macro Economic Indicators and noted that the CPI inflation was estimated to be 3.56 percent in August 2016 compared to 8.55 percent in August 2013 and 11.56 percent in August 2011.

Furthermore, the ECC was informed that there was sufficient wheat stock in the country, which stood at 9.49 million tons on September 20, 2016, compared to 8.75 million tons at the corresponding period last year.

The ECC was also apprised that Large Scale Manufacturing (LSM) increased by 3.2% in FY 2015-16. -Business Recorder