Finance advisor Dr. Abdul Hafeez Shaikh struck a gong on Monday at the stock exchange to mark the 200 billion Rs Pakistan Energy Sukuk II (PES-II) listing.
Back in June, the government issued the 10-year Islamic bond through its wholly-owned business, Pakistan Holding Ltd, to raise cash for overdue payments in the power sector. Its listing on the stock exchange means investors can buy and sell on the secondary market the Shariah-compliant instrument having a face value of Rs 5000.
He said, “Using competitive bidding to boost Rs200bn is a major improvement. Its cost of borrowing is slightly lower than that of PES-I issued in 2019.” As a result, the government managed to collect funds for the first time at a rate that is lower than Rate (Kibor) provided by the Karachi Interbank.
On a semi-annual basis, the instrument will pay investors a six-month Kibor return minus 10 basis points (0.1%). In comparison, debt servicing on PES-I last year was Kibor plus 0.8% for six months. Thus, for the next decade, the government will save Rs1.8bn on the new sukuk per year.
Dr. Hafeez Shaikh cherry-picked economic indicators like non-tax revenue growth and social sector spending in his speech and subsequent contact with the press to defend the success of the government. He skirted around main issues like circular debt, economic recession and per capita income decline. For instance, last year’s PES-I, issued with the same goal of curtailing the circular debt, failed to make any dent in its accumulation. Instead the circular debt grew over one-third or Rs538bn in FY20.
Likewise, the advisor did dodge multiple questions about the recently announced Rs1.1 trillion Karachi package. Despite repeated prodding he said nothing about either the federal government’s share or the planned funding sources for such a massive effort.