The government may offer as much as Rs542 billion ($5.6 billion) of local-currency sukuk in 2014, including notes backed by a highway and an airport, Ahmed Ali Siddiqui, head of product development and Sharia compliance at Meezan Bank, which advises authorities on Islamic issuance, said in an April 9 interview in Karachi. That compares to one sale of Rs43 billion in 2013.
"The State Bank of Pakistan's market share target could be missed if activity doesn't pick up," Mohammed Ali, chief executive officer of UBL Fund Managers, which oversees Rs40 billion of assets, said in an interview in Karachi. "The government needs to issue sukuk. There is no other way."
Pakistan, home to the world's second-largest Muslim population, last sold Rs43 billion of three-year Ijara sukuk in March 2013.
The current pause in issuance is the longest since December 2010. The government of Prime Minister Nawaz Sharif, which was elected for an unprecedented third term last May, raised $2 billion from a non-Islamic dollar offer last week, the first such sale since 2007.
The rupee has strengthened 9.7 per cent against the greenback this year, buoyed by an increase in foreign-currency reserves following a loan from the IMF.
Authorities are planning to sell Rs42 billion of sovereign Sharia-compliant bonds backed by a highway in the next two weeks, followed by Rs100 billion of sukuk tied to Karachi's Jinnah International
Airport, said Siddiqui at Meezan, the country's largest Islamic lender. The nation is also considering
issuing Rs300 billion to Rs400 billion of short-term Sharia-compliant bills later this year, he said.
There has been only one corporate sukuk offer in Pakistan so far this year, a 6 billion rupee sale in February by K-Electric, which sold out in 12 hours, according to a company statement. The dearth of investible assets prompted scholars to give a one-time exemption to designate the shares of Oil & Gas Development as Sharia-compliant, even though its debt holdings exceed the maximum allowed amount, according to Meezan Bank's Siddiqui.
Islamic deposits climbed 31 per cent from a year earlier to Rs1.01 trillion in December, outpacing the 15 per cent growth for the entire banking industry, according to central bank data. There's a risk that growth will slow as the glut of funds compared with investible assets limits returns, according to BankIslami Pakistan and Dubai Islamic Bank Pakistan.
The State Bank of Pakistan plans to issue money-market instruments to help lenders manage their funds.