Pakistan raises PKR 171 billion in Sukuk auction, short of target

The Pakistan government raised PKR 171 billion ($606 million) through its latest Ijarah Sukuk auction on Wednesday, falling short of its PKR 200 billion target despite robust investor participation totaling PKR 475 billion, according to official data.

Of the total raised, PKR 164 billion came from competitive bids and PKR 6 billion from non-competitive bids.

The one-year discounted Ijarah Sukuk was issued at a cut-off rental rate of 10.45%, up 46 basis points from the previous auction on July 23.

Floating-rate Sukuk saw mixed results. The three-year GIS FRR was issued at a rental rate of 10.44%, up 21 basis points, while the five-year GIS FRR saw a 3 basis point decrease to 10.94%. The 10-year GIS FRR remained unchanged at 11.99%.

Analysts say the uptick in rental rates signals market expectations of persistent inflationary pressures and cautious fiscal management.

Government Ijarah Sukuk (GIS) offer a Shariah-compliant alternative to conventional debt instruments such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). Unlike traditional Government Debt Securities (GDS), GIS adhere to Islamic finance principles, making them a distinct option for faith-based investors.

Globally, Sukuk have gained significant traction as a core Islamic financial instrument. By the end of 2023, Sukuk accounted for 24.94%—or $842 billion—of the Islamic finance industry’s total assets, according to industry reports.The global Sukuk market expanded by 16% in 2023, adding $212 billion in value.