In a groundbreaking move, investors demonstrated overwhelming support on Friday by pledging a significant financing amount of Rs. 479 billion in the auction of one-year Ijarah Sukuk at the Pakistan Stock Exchange (PSX). This exceeded expectations by 16 times, far surpassing the initial target of Rs. 30 billion, according to unofficial reports pending official confirmation from the Ministry of Finance.
This auction marked a departure from the norm, as it represented the Ministry of Finance’s first auction at the PSX, a departure from the traditional practice of conducting such auctions through the State Bank of Pakistan (SBP). While official results are yet to be disclosed, it is evident that the response has been exceptionally positive.
Shariah-compliant banks had previously secured one-year Sukuk at a variable rental rate of “T (T-bills) minus 100 basis points” at the PSX in the preceding week.
An official from the currency market observed that the Ijarah Sukuk auction at the PSX broke the banks’ monopoly in the bond market, redirecting funds from government papers to the private sector, fostering economic activities. This strategic shift aimed at more widespread profit distribution, enabling individual investors to participate with amounts as low as Rs. 5,000. The auction was reportedly oversubscribed 13 times, reaching a total of Rs. 369 billion.
Caretaker Prime Minister Anwaarul Haq Kakar inaugurated the Sukuk at the PSX, and Caretaker Finance Minister Dr. Shamshad Akhtar was also present at the event. The PSX highlighted this event as a landmark development, hosting the primary market auction of government debt securities (GDS) following rule changes aimed at facilitating the raising of government debt in the capital markets.
During the ceremony, Prime Minister Kakar emphasized the collective responsibility to promote primary market auctions, considering it a significant achievement for the entire market ecosystem. He attributed the renewed investor confidence to the successful signing of an IMF standby arrangement, the execution of the annual budget 2023-24, and improvements in fiscal and external accounts.
Prime Minister Kakar symbolically rang the gong during the ceremony, signifying progress and prosperity while underscoring the commitment to fostering an inclusive and robust financial ecosystem. He attributed the bullish sentiment in the stock exchange to factors such as an improved economy, foreign investor participation, high yield, and a stable exchange rate.
Caretaker Finance Minister Akhtar termed it a momentous occasion for financial markets and the Pakistani economy, highlighting the steps taken by the Debt Management Office of the Ministry of Finance to enable the primary market auction at the PSX.
Farrukh H Khan, the MD and CEO of PSX, explained that amendments in existing rules facilitated the primary market auction of GDS at the PSX, breaking the monopoly that was previously held by the State Bank. This transformative step signifies a shift toward a more diversified and inclusive financial landscape in Pakistan.
