Government takes important step towards promoting Islamic banking

ISLAMABAD: The cabinet on Tuesday approved the issuance of Islamic sukuk and leases to promote the Islamic banking (IB) system in the country.

The cabinet approved the finance ministry’s summary on the sukuk bond issue, while adding that the finance ministry could fix more assets there.

The Ministry of Finance had suggested mortgaging the Islamabad-Peshawar highway, the Pindi Bhattian-Faisalabad highway and the Islamabad highway as well as two major airports, Islamabad and Lahore for the issuance of sukuk.

The Ministry of Finance, in a summary, available with Business Recorder, said that to support the government’s fiscal position and promote the Islamic banking sector in the country, the Finance Division intends to advance its national and international agenda. ljara Sukuk.

Sukuk are Sharia-compliant debt instruments structured to pay return on investment in the form of rent instead of interest using an underlying asset.

In the case of ljara Sukuk, entanglement, assets are used to structure transactions.

To date, the Finance Division has carried out 32 domestic transactions and four international Ljara Sukuk transactions amounting to Rs 1,573 billion and US $ 3.6 billion, respectively.

In addition, the government issued two “Energy Sukuk” of PKR 200 billion each in March 2019 and May 2020, respectively, to settle the arrears in the electricity sector.

These sukuks were issued against the assets of certain state-owned electricity generation and distribution companies.

MI highway, M2 highway, M3 highway, and Jinnah International Airport have been approved for domestic ljara Sukuk in the past.

At present, the MI and M3 highways are not congested while at present, the Islamabad-Chakwal section of the M2 highway is not congested.

Following the approval of the Federal Cabinet at its meeting on March 31, 2020, the government launched a national ljara Sukuk program of Rs 756 billion using the unoccupied land at Jinnah International Airport (JIA), Karachi.

The assets are almost fully utilized with the issuance of domestic Ijara Sukuk valued at Rs 636 billion and the structuring of Naya Pakistan Islamic Certificates (INPCs) of approximately Rs 59 billion.

As JIA, Karachi will soon be exhausted; There is an urgent need to identify new unencumbered assets to ensure uninterrupted issuance of Ijara Sukuk in domestic and international capital markets.

The continuity of the issuance of national sukuk will also allow the government to achieve its goal of having 10% of Sharia-compliant instruments in national securities by the end of fiscal year 2023 ( medium-term debt 2019 / 20-2022 / 23).

At the end of December 2020, it was 3.8%.

The Federal Cabinet, at its meeting on January 26, 2021, instructed the Finance Division to identify underlying asset options for Sukuk issues.

The Finance Division ; accordingly, identified the M-1 and M-3 highways.

Islamabad Highway and Islamabad and Multan International Airports and requested the Ministry of Communication / NHA and the Aviation Division / Civil Aviation Authority (CAA) to grant the necessary permits to use these assets for Ijara Sukuk’s broadcasts.

The Aviation Division and CAA did not respond.

The Ministry of Communications, while ensuring its cooperation, has asked the Finance Division to consider compensating the NHA with appropriate asset usage charges for its assets (Annex VII), which is completely unprecedented.

In next year’s domestic and foreign financing plan, the need to mobilize additional resources to the tune of 1.2 trillion rupees and 3.5 billion US dollars has been proposed.

Accordingly, the Finance Division would prefer to undertake Sukuk transactions as much as possible as this would help to obtain better prices compared to other means of raising domestic and external resources such as treasury bills, GDPs and euro- classic bonds.

Therefore, it is essential that all identified assets are ready for the rapid launch of Sukuk’s national and international programs next year.

In view of the urgent need to continue the government’s national and international Sukuk programs and the issuance of Islamic NPCs, the Federal Cabinet is urged to authorize the Finance Division to use these assets.

The federal cabinet also approved the import of another million metric tonnes of wheat to build up strategic reserves.

In a post-cabinet briefing, Information Minister Fawad Chaudhry said the government must approve the import of wheat even though there has been a “record production” of wheat this year in the country. .

Speaking about overseas Pakistanis and obstacles to electoral reforms, he said electoral reforms are on hold due to the problems faced regarding the right to vote for overseas Pakistanis.

He also praised Pakistanis overseas, describing them as the main reason for Pakistan’s growth.

He said that an amount of “1 trillion rupees” sent by Pakistanis overseas is a sign of confidence in the leadership of Prime Minister Imran Khan.

The Information Minister, opposing the opposition’s plan to hold a multiparty conference (PCA) on electoral reforms, said that “the government does not consider Nawaz Sharif, Maulana Fazlur Rehman and Maryam Nawaz as stakeholders in the current political configuration “.

The minister said opposition leaders had made all-out efforts to derail the existing system, adding that the opposition’s decision to organize a CPA on electoral reforms was actually aimed at weakening parliament.

Chaudhry said the government is however open to discussing proposed electoral reforms with parliamentary leaders of opposition parties.

He said electronic voting machines (EVMs) are used in 20 countries and Estonia, one of the Baltic states, is the most digitized country as it has now switched to internet voting from the EVM.

He said the purpose of introducing EVMs is to organize free, fair and transparent polls.

He also pointed out that deciding on a mechanism for holding elections is the job of the country’s political leadership, and that “Pakistan’s Election Commission (ECP) and bureaucrats have nothing to do with it”, all adding that anyone intending to write a letter to the ECP should keep in mind that the sanctity of parliament should not be violated in its wake.

The minister further stated that the ECP does not have the right to raise questions about laws passed by parliament.

He said the ECP is supposed to implement all laws that parliament has passed while issues related to laws that militate against the letter and spirit of the Constitution will be dealt with by the Supreme Court.

The minister said that “if someone wants to be in politics, he has to leave the PCE and form a political party. Parliament is supreme. ECP must respect the privileges of Parliament.

The minister said the cabinet also approved the introduction of the Public Property Encroachment Removal Bill, 2021, to pave the way for the reclamation of government lands encroached by certain elements.

He said a federally appointed officer would be empowered to issue a show cause notice to an infringer according to the law and, in the event of an unsatisfactory response, he could take the necessary action, including sanctioning and imposing of ‘a fine.

He said if the emperor refused to cede the property then rent would continue to accrue on him which he would be required to pay when he vacated the property.

Chaudhry said an appeals tribunal will also be formed with the power to make decisions in such cases within 30 days.

“There are federal properties that have been invaded and several National Press Trust properties have been forcibly occupied by invaders. Likewise, Pakistan Railways and Evacuee Trust will also be able to reclaim their land, ”he said.

Speaking about certain conditions imposed by some countries regarding the acceptance of certain vaccines only, the minister said that the matter had also been discussed with the World Health Organization (WHO).

The minister said: “This is a global problem and we expect this problem to be resolved soon.”

He said the government has seen a trend among the public to get vaccinated, which is encouraging, “and this particular interest was most evident when we opened up vaccinations to all people over the age of 18. Now, on average, 0.4 million people a day get vaccinated, and our goal is to vaccinate 70 million people by the end of the year.

The minister said a cabinet committee had been formed to review policies relating to NGOs.

He also said the cabinet approved the appointment of five independent directors in the Diamer-Bhasha company.

The minister said that a three-month extension of Asim Rauf as director general of the Pakistan Medicines Regulatory Authority (DRAP) was also approved by the cabinet.

“His extension is only valid until the appointment of the next CEO,” he added.

“A request had previously been made to the government regarding the establishment of the Supreme Court staff colony. Now a cabinet committee has been formed with Shireen Mazari as its head to oversee the modalities of the formation of such a colony.” , he added.

He also announced that the Cabinet had allowed Pakistanis residing in Luxembourg to hold dual citizenship.

“They were authorized to have Luxembourgish nationality, while being of Pakistani nationality,” he added. The cabinet also approved the appointment of Islam Khan as the new chairman of PIA, the minister added.

Copyright Business Recorder, 2021

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