KARACHI: Pakistan raised more than Rs76 billion ($274 million) through an auction of sovereign Islamic bonds on the Pakistan Stock Exchange (PSX), a statement said on Thursday, as the government sought to diversify its borrowing sources and tap growing demand for Shariah-compliant investment instruments.
The statement, issued by Meezan Bank that acted as joint financial adviser for the transaction, said the sixth auction of Government of Pakistan Hybrid Sukuk held a day earlier raised Rs76.286 billion for the finance ministry through the PSX platform.
The auction attracted bids worth Rs262.197 billion ($942 million) in face value, while the realized value — or the amount investors committed after price adjustments — stood at Rs254.593 billion ($915 million).
Sukuk are Islamic financial certificates structured to comply with Shariah principles, which prohibit interest payments. Unlike conventional bonds that pay fixed interest, sukuk are backed by underlying assets and provide investors returns through mechanisms such as profit-sharing or rental income.
Pakistan has increasingly relied on sukuk issuances recently to deepen its Islamic finance market, broaden its investor base and provide banks and institutional investors with Shariah-compliant fixed-income investment options. Islamic banking now accounts for a growing share of Pakistan’s financial sector, fueling demand for sovereign-backed Islamic securities.
“The successful raising of over Rs76 billion through the PSX platform highlights the growing role of the capital market in government debt mobilization, particularly through Islamic finance instruments,” the statement said.
“It also reflects the increasing depth of Pakistan’s Sukuk market as institutional investors continue to participate in Shariah-compliant avenues for fixed income investment.”
According to the auction results, the cut-off rate for the one-year fixed-rate discounted sukuk was set at 12.4880 percent, down 1.32 basis points from the previous auction. The cut-off rate refers to the maximum return accepted by the government to borrow funds from investors.
For the 10-year variable rental rate sukuk, the cut-off rental rate was set at 11.8569 percent, representing a spread of 0.4884 percentage points over the benchmark reference rate of 11.3685 percent. In Islamic finance, a rental rate is used instead of interest, while the reference rate serves as a benchmark used to determine investor returns.
The statement quoted market participants as saying the strong bidding response reflected continued investor appetite for sovereign-backed Islamic instruments, particularly among banks, mutual funds and institutional investors seeking lower-risk Shariah-compliant assets backed by the government.
