Palestine plans first sukuk sale

The central bank of the Palestinian Authority, whose leaders plan to seek statehood at the United Nations this month, may sell its first Islamic bonds in December to bolster an economy sustained by foreign aid. "It's essential for our monetary policy that the government issues bonds or securities and develops a yield curve," Jihad Al Wazir, governor of the Palestine Monetary Authority, said in an interview in Ramallah on Monday. "Sukuk is a security but there is an underlying asset. This makes the banks a little more comfortable." Economic growth in the West Bank and Gaza Strip is slowing, prompting the International Monetary Fund to revise its 2011 forecast to 7 per cent from 9 per cent, according to the World Bank. The Authority's "substantial progress" in building up institutions is being threatened by aid delays and Israeli security curbs, the World Bank said in a report on Monday. The reliance on aid reduces confidence that the region can become economically viable, according to National Commercial Bank. The Authority's central bank plans to raise $50 million (Dh183.7 million) in a private placement to local banks and the bonds, which will pay asset returns to comply with Islam's ban on interest, may mature in three years, Wazir said. The sale was postponed from the second quarter because changes needed to be made to legislation to allow for the sale of the securities and there was no Sharia-compliant board to review them, the governor said.