By Staff Reporter
ISLAMABAD: Pakistan more than doubled its sovereign Islamic bond sales this year to Rs4.4 trillion, taking the government’s total Sukuk to Rs10 trillion, even as Finance Minister Muhammad Aurangzeb acknowledged that foreign investors have largely stayed on the sidelines.
Aurangzeb said issuance rose 113% from about Rs2 trillion a year earlier, according to a statement issued Thursday. The Rs10 trillion mark is equivalent to roughly $35.8 billion. The five-year compound annual growth rate is about 22%, against roughly Rs761 billion in 2020, he said at a ceremony marking the milestone.
Data from Meezan Bank show the government sold Rs4.179 trillion of Sukuk from January through Oct. 31, already more than double the previous record of Rs2.052 trillion set across all of 2025. The Rs10 trillion level has been crossed both in outstanding amount and in total issuance.
The minister said the milestone reflects more than volume. He pointed to the hybrid government Sukuk, which combines Shariah-compliant structures and gives the state more room to use public assets as backing. Since 2008, the government’s Sukuk have been issued mainly under the Ijarah structure, which ties each sale to tangible state assets; the hybrid format pairs Ijarah with Commodity Murabaha so the same asset base can support larger issuance. The instrument was developed by the Finance Ministry’s Debt Management Office together with the State Bank of Pakistan.
Short-term Sukuk with three- to six-month maturities filled a long-standing gap in the market, Aurangzeb said, and helped build a Shariah-compliant yield curve across maturities.
Foreign demand has not kept pace. Aurangzeb said overseas investment in Sukuk remains below expectations, even though inflows through Special Convertible Rupee Accounts into Treasury bills and Pakistan Investment Bonds have been positive. He described foreign participation as underwhelming and said the instruments need to be promoted to international investors. He said banks, primary dealers and brokers should work together on that effort.
He also pressed for broader retail participation through digital platforms, saying opportunities should not be confined to institutions and large investors. Individuals could take part with as little as Rs5,000, he said, which would help widen the investor base.
On listed Sukuk, the Ministry of Power has issued the first mandate to National Debt Company, which is preparing its first listed issue. Aurangzeb said he hopes it will set a benchmark for other corporate borrowers. He added that the Securities and Exchange Commission of Pakistan, the State Bank, the Pakistan Stock Exchange and the Central Depository Company will need to coordinate to build out the market’s infrastructure. He reiterated the government’s aim of a deep, diversified and liquid Islamic capital market built on cooperation among the state, private sector, regulators and financial institutions.
Aurangzeb also spoke about learning, reflection and cooperation in Islamic finance, citing Quranic teachings and the role of Ijtihad in Islamic jurisprudence. He said new economic and financial questions call for careful scholarship grounded in the Quran and Sunnah, and urged stakeholders to focus on common ground.
The Sukuk push comes as borrowing costs rise. The State Bank raised its policy rate by 50 basis points to 12% on Oct. 26, with nine of 10 committee members in favor, citing the Middle East conflict and persistently high global energy prices. Consumer price inflation eased to 9.61% in October from 10.26% in September, still above the central bank’s 5%-7% target range. The International Monetary Fund and Pakistani authorities reached a staff-level agreement in October on the fourth review of the country’s Extended Fund Facility and the third review of its Resilience and Sustainability Facility, after a mission that ran from Sept. 23 to Oct. 7.
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