It will be used to fund the national airline’s deficit
The government has decided to issue sukuk bonds to raise Rs20 billion for Pakistan International Airlines in order to meet the financial needs of the national flag carrier.
According to a document, the term period of sukuk bonds will be 10 years and more sukuk bonds worth Rs5 billion will be issued if investors show further interest. The bonds will also be listed on the Pakistan Stock Exchange.
Sukuk bonds are an Islamic financial certificate issued by the State Bank of Pakistan. Islamic financial institutions and other investing companies buy these bonds. The government uses the raised funds to fund deficit such as that of PIA or fund other projects.
Prior to the issuance of these bonds, instead of a paper guarantee, a for-profit asset is held as collateral, the value of which is equal to the amount received by the government. The government pays the investor a profit instead of interest.