ISLAMABAD, Oct 19: The government on Tuesday appointed Citibank and Hong Kong Shanghai Banking Corporation (HSBC) as Pakistan's lead managers to float $500 million Islamic bonds (Sukuk) in Europe and Asia including the Middle East.

"Today we have handed over a letter to the representatives of Citibank and HSBC to float on Pakistan's behalf Islamic bonds commonly known as Sukuk," said economic adviser to the Ministry of Finance Dr Ashfaque Hasan Khan.

He told Dawn here on Tuesday that the size of the Sukuk was yet to be determined, therefore it cannot be categorically stated at this stage whether it will be to the tune of $300 million, $500 million or more than that.

But Dr Khan agreed that there were some reports that the size of the Islamic Bond would like to be that of Eurobond that amounted to $500 million. "We have learnt some lesson after the flotation of Eurobond and that is why we are not right now talking about the exact size of the proposed Islamic bond."

The successful issuance of $500 million Eurobond, the economic adviser said, has encouraged the government to also float Islamic bonds to attract, especially this time, investors from the Middle East.

He said the government would soon be holding road shows in Europe, Asia including the Middle East to sell Islamic Bond for which there existed a great appetite.

Earlier, he said, that Eurobond mostly attracted investors from the Europe and Asia and this time the government planned to lure Middle East based investors, many of whom were now reluctant to invest in the United States due to one reason or the other.

Similarly, he said that offshore US investors sitting in Middle East could also be attracted for the new Pakistani bond venture.

Responding to a question, he said that Eurobonds were being sold on premier which showed its strength and popularity. "This is good for the country to launch such bonds," he said adding that due to flotation of Eurobond two major international companies of the telecom sector have decided to substantially invest in Pakistan.

He said there is a big potential in the Middle East to attract foreign investment in Pakistan and "I am sure that the Sukuk will fascinate Islamic investors in our part of the world."

To another question, Dr. Khan said that Pakistan wanted to remain active on a radar screen of international capital market and that was why it had taken a concerted decision previously to enter into the bond market.

He was asked why Pakistan preferred to go into the international capital market to raise money especially when it had received offers including from the International Monetary Fund (IMF) to get the required financial support. "Today we get better treatment from the world and our private sector people are getting loans on low interest rate and this is all due to our financial credibility, established through the flotation of Eurobonds," asserted Dr Khan who is also the director general of Debt Coordination Office.

The economic adviser said that China had issued $1 billion Eurobonds and $500 million Dollar bonds recently despite the fact that its foreign exchange reserves have reached to over $470 billion.

The purpose, he said, was to carve better place for Pakistan in the international capital market by floating Eurobonds.

He did not rule out the possibility of floating Dollar bond in the United States in future. However, he said that one has to follow US laws especially 144A Regulation to issue Dollar bonds.

"You have to fulfil various legal requirements to do this job in the United States," Dr Khan said adding that there existed a great appetite for Pakistani bonds in Europe and Asia including the Middle East which will be first met before taking any decision to also float Dollar bonds in the United States.