KARACHI (AFP) – Pakistan has sold $1 billion in Islamic bonds to raise its foreign exchange reserves in line with IMF demands.
The government had initially planned to float $500 million worth of the bonds – known as “sukuk” – on the global capital market, but was inundated by offers worth $2.3 billion.
“The government decided to accept offers of $1 billion for a five-year tenure at the profit rate of 6.75 per cent,” Pakistan’s ministry of finance statement said Wednesday.
The sukuk is a syariah compliance bond that offers profits rather than interest to its subscribers.
Finance minister Ishaq Dar had marketed the instrument through roadshows in Abu Dhabi, Dubai, Singapore and London.
According to a statement from his office, 35 per cent of subscribers came from Europe, 32 per cent from the Middle East, 20 per cent from North Africa and 13 per cent from Asia.
Pakistan will use the debt to retire its formidable domestic debts of around $150 billion that account for about 50 per cent of the country’s GDP.
The bond will also help raise country’s foreign exchange reserves of $13.5 billions by another $1 billion of the sukuk proceedings.
“This will contribute significantly in achieving already declared target of taking the national forex reserves to $15 billion by end December,” Dar said.
By the end year, Pakistan is also expected to get $1.1 billion instalment of an International Monetary Fund (IMF) facility.
The country was granted the $6.6 billion IMF bailout package last year to help achieve economic reforms.