Pakistan to launch 200 billion rupee Islamic Sukuk to ease power sector debt

ISLAMABAD (Reuters) - Pakistan has approved the launch of a 200 billion rupee ($1.44 billion) Islamic Sukuk to help pay off arrears building up in its troubled power sector, state-run Radio Pakistan said on its website on Tuesday.

The approval came from the Economic Coordination Committee, chaired by Finance Minister Asad Umar.

"The bond will be issued through the consortium of Islamic banks," Radio Pakistan said.

The government has been falling behind on payments to electricity providers and distribution companies, accumulating arrears that were threatening to seriously disrupt electricity generation in a nation still grappling with shortages.

Power minister Omar Ayub Khan told Reuters the government planned to use the money to "alleviate cash flow issues" suffered by power plants, or independent power producers (IPPs), which generate a large share of electricity.

The Sukuk cash will also be used to "replace more expensive debt" from the past, which would save money, Khan added.

Pakistan's power sector arrears, also known as "circular debt", stood at more than 1.4 trillion rupees ($10.10 billion), Khan told Reuters.

($1 = 138.6000 Pakistani rupees)

(Reporting by Drazen Jorgic; Editing by Robert Birsel)