Strong demand for Islamic instruments as Pakistan raises PKR 118 billion in GIS auction

Pakistan raised PKR 118.05 billion in its 32nd Government Ijarah Sukuk (GIS) auction, highlighting strong investor interest in the country’s Islamic finance sector, officials said Wednesday.

Meezan Bank, the lead Joint Financial Adviser for the transaction, structured and executed the auction, reinforcing its role in Pakistan’s Islamic capital markets and the development of Shariah-compliant financial instruments.

According to the Pakistan Stock Exchange, the auction drew total bids of PKR 445.49 billion, reflecting broad confidence in sovereign Sukuk and robust liquidity within the country’s Islamic banking system.

The government accepted only a portion of the bids to align with its funding strategy and maintain market stability, a selective approach analysts say signals a maturing Sukuk market with greater focus on pricing and risk management.

Short-term and selective tenors saw strong uptake. The one-year Sukuk cleared at 11.4999%, the five-year fixed rental Sukuk at 11.7500%, and the 10-year variable rate Sukuk attracted notable participation, indicating growing demand for flexible, floating-rate Islamic instruments.

The auction coincides with Pakistan’s move toward a fully Islamic financial system following the 26th Constitutional Amendment, which mandates the elimination of interest-based lending. Sukuk are expected to be central to government borrowing as the country transitions to Shariah-compliant financing.

Market participants said Islamic liquidity remains strong, with investors adopting a more strategic approach to duration and portfolio risk amid evolving rate expectations.

Government Ijarah Sukuk continue to mobilize domestic Islamic liquidity, support fiscal needs, and advance Pakistan’s broader Islamic finance agenda, underscoring long-term growth potential in the sector.