ISLAMABAD: Pakistan has issued $1 billion of five-year dollar-denominated sukuk bonds in order to offset pressure on its balance of payments and return foreign loans maturing this year.

Finance Minister Ishaq Dar said during a press conference on Thursday that Pakistan received nearly $2.4 billion in total offers from foreign investors.

The five-year bond has been issued at a rate of 5.5 per cent. The rate is lower than the price the country paid two years ago for raising $1bn through the same instrument.

With the fresh borrowings, the PML-N government has so far issued Eurobonds and sukuk bonds worth over $4.5bn during its three-year tenure.

Pakistan’s economy grew 4.7pc in the last fiscal year, its fastest pace since 2008, rebounding from a series of crises in recent years, helped by low oil prices and the improved security situation.

The government has recently embarked on vast infrastructure spending to eradicate energy shortages and the country’s debt is rated B3 by Moody’s and B- by Standard & Poor’s.

It has been decided to raise the fresh debt to buffer the reserves ahead of some major loan repayments during the second half of this fiscal year, as the Paris Club debt reaches maturity.

The finance minister, who cancelled his visit to the United States (US) due to the Kashmir issue, held two back-to-back video conferences with his team to give final approvals of the transaction.

Last week, the Economic Coordination Committee (ECC) of the cabinet's plans for the immediate launch of $500m to $1bn Islamic bonds (sukuk) in the US capital market were finalised. The ECC had resolved to end the launch process by October 5.

The ECC also waived 10 types of taxes on Islamic bonds.

The timing of the bond launch has been selected to coincide with successful completion of a programme with the International Monetary Fund that is expected to release its last $102m tranche of the $6.64bn programme on Sept 28.

The government last week said that, “the trade account has been worsening and consequently pressures are building on the balance of payments.”