LAHORE, April 5: The Water and Power Development Authority (Wapda) plans to float first ever Islamic bond in local currency to raise Rs8 billion for financing Mangla Dam project. The authority in its meeting on Monday decided to float sukuk (Islamic bonds) in the next three month, provided the Ministry of Finance approves the issue. The bond floating would be Shariah-compliant and would not carry any fixed interest rate. Rather, the authority will pledge one of its water wing project (most probably Mangla Dam) and use its income to service the bonds.

It would also be the record amount (Rs8 billion) collected by the authority through bonds. The previous record was Rs7 billion which it collected in 2003 for financing Ghazi Barotha Hydle Power Project (GBHP).

The authority has involved around 23 bankers in preparing the bonds plan and it is largely guided by Dr Salman Shah, adviser to the prime minister on finance and revenue.

The authority also decided to appoint a Transaction Adviser for making arrangements for the issue and hoped to float these bonds in next three months.

Talking about the Islamic bond, Wapda Chairman Tariq Hamid said that the money was basically meant for water sector and would ensure timely completion of the projects.

Though the interest can not be fixed under the sukuk, but the authority hopes to keep bonds highly competitive and economically attractive.

An economic analyst thinks that Wapda seems to have taken a very big challenge to be the first to float such bond. It would certainly be a trend setter but commenting on economic viability would be still too early, he said.