KARACHI, March 3: Pakistan will issue a local currency Islamic bond, or sukuk, in the fiscal year ending on June 30, and the size and tenure is likely to be decided this month, officials said on Monday.

The government has already invited banks to submit, proposals to handle a sovereign dollar-bond issue, though market players have warned that the offer will flop due to investors’ aversion to risk.

“We plan to issue a sukuk soon, but are yet to finalise the details,” caretaker Finance Minister Salman Shah told Reuters.

“This would be a domestic operation, and has no connection with the sovereign bond plans, which are in place,” he said.

Another government official, who requested anonymity, said presentations for the local currency sukuk are already under way.

“We plan to conclude these presentations by March 17, after which we will take a decision on the size and tenure,” he said.

This will be the first sukuk issue by the government in the domestic market, though it raised $600 million through an Islamic bond issued in the international market in 2005.

Analysts said unlike the planned sovereign issue, the government should not face any trouble attracting investors to the sukuk, as Pakistan’s market for Islamic banking instruments is growing.

In 2007, assets of Islamic banks grew by about 74 per cent to Rs205 billion, from Rs118 billion in December 2006.

This equates to a 4.2 per cent share of Pakistan banks’ total assets, according to State Bank of Pakistan data.—Reuters