Islamabad Pakistan has Rs930 billion to pledge to increase debt on Islamic bonds and this move aimed at avoiding higher interest rates than regular mortgages.
The federal cabinet will decide today whether to promise Fatima Jinnah Park of Islamabad as collateral to save interest rates amid the political turmoil of state assets that have recently increased debt.
Treasury documents show that the three political governments (2008-2020) have pledged government assets such as airports and airports to raise funds for budget support and to build foreign exchange reserves. However, the pace and volume of borrowing have increased during the administration of the Pakistani government Tehreek-e-Insaf due to the growing inflation, official documents have revealed.
Multan TV HD reported that the Pakistani PM will put forward the proposal to mortgage the Islamabad Park (F9 park) during the next meeting of the federal cabinet, which is scheduled to take place via video conference on Tuesday.
Credit increased by Sukuk bonds, backed by government assets, are less expensive compared to regular bonds.
The Treasury Department has filed a petition before the state cabinet to support the government’s financial position and to promote the Islamic banking industry, with the finance ministry aiming to roll out Ijara Sukuk in domestic and international markets.
In the case of Sukuk, tangible assets are offered as collateral, which helps the borrower to pay a relatively low-interest rate.
The PPP, PML-N, and PTI all governments have not been able to succeed in improving revenue and exports, forcing them to borrow heavily from domestic and international markets to meet budget and foreign finance needs.
What is Sukuk’s obligation: Countless government property is sold to a creditor. The lender then lends the property to the government at a market-based lease. At the maturity of the Sukuk, these goods are purchased by the government from the owner of the Sukuk.
The Ministry of Finance has stated that abolition of Interest, standard lending was also a requirement of the Constitution.
Price of Fatima Jinnah Park The Treasury Department has sought cabinet approval for the issuance of local and international Day by promising the park as a commodity. It said the full size of Sukuk’s transaction would be determined after a market response.
The Capital Development Authority manages the F-9 park which is distributed over 580 hectares of land. The conservationists – the park’s valuer – have assessed the park’s total value of Rs930 billion, according to Treasury documents. The cost per acre of land is determined at Rs1.6 billion.
The PML-N government (2013-2018) has accumulated a debt of Rs435 billion in five Sukuk transactions, which accounted for 25.6% of total net assets. PML-N has promised traffic jams to increase debt.
The PPP government (2008-13) made 14 transactions of Sukuk and collected Rs501.5 billion in debt from Sukuk bonds by promising various goods. A loan of Rs 1501.5 billion was equivalent to 29.5% of the total debt received by Sukuk 12 years ago
The official record shows that the PTI government two and a half years ago had already made 12 transactions for Sukuk and raised a debt of R776 billion. This was equivalent to 44.5% of funded jobs in the last 12 years.
Three governments led by political parties have already pledged M-1 Motorway (Islamabad-Peshawar), MII Motorway (Islamabad-Lahore) MIII Motorway (Islamabad-Faisalabad), and Jinnah International Airport, Karachi.
In March last year, the ruling government also promised to promise Jinnah International Airport an increase of Rs750 billion in debt on local Sukuk bonds.
In May last year, the PTI government once again accumulated a debt of Rs200 billion on Sukuk by promising power-sharing assets and energy companies.
The PTI government has already borrowed Rs562 billion from the assets and the remaining Rs190 billion debt will be released in the next few months, according to the Treasury.
According to documents from the department, by promising Karachi airport, it saved Rs.1.1 billion in interest over five years. The department also said it was saving Rs18 billion from Energy Sukuks compared to conventional loans.
Overall, the PTI government has sought to save Rs37 billion so far by accumulating debt on assets compared to conventional loans.
The department said the CDA could not oppose the use of industrial land in F-9 Park, Islamabad.
At its last meeting on Tuesday, the federal cabinet withdrew twelve types of income tax to increase nearly $ 2 billion in debt on Pakistani bonds first introduced by Chinese currencies, Sukuk bonds, and Eurobonds.
Cabinet exempted investors from cash taxes after the Treasury told them that without exemptions, private businesses “would not be attractive to international investors”.