KARACHI, July 23: The state-run Pakistan Agricultural Storage and Services Corporation (Passco) will issue Rs10 billion ($165.67 million) Islamic bond (sukuk) in the domestic market later this year, a government official said on Monday.

“Passco’s sukuk will be worth Rs10 billion and it will have a five-year tenor,” Zafar Shaikh, additional director general at the finance ministry's debt office told Reuters.

The issuance of sukuk is planned for early second quarter of fiscal year 2007-08, said Shaikh. He added that a lead manager for the issue has yet to be appointed.

Passco has become the fifth state-run organisation to announce issuance of domestic sukuk in recent months. These include Pakistan International Airlines, Sui Southern Gas Co. Ltd., Karachi Shipyard and Engineering Works, and Water and Power Development Authority (Wapda).

Shaikh said the issuance of sukuks was part of the government strategy to encourage Islamic banking.

“The ministry of finance, along with the State Bank of Pakistan is fully committed to provide a level-playing field to Islamic banks by providing Islamic instruments in the market,” he said.

As of March, Islamic banks had assets of Rs135.64 billion around 3.2 per cent of the country's total banking industry, according to central bank’s data.

Shaikh said Passco’s sukuk will qualify for trading in the primary as well as in secondary markets. Proceeds from the issue will be utilised by Passco to finance its commodity purchase operations, he added.—Reuters