Pakistan raises $390m through inaugural hybrid Sukuk issuance

Pakistan has raised $390 million through its first hybrid Sukuk issuance, the finance ministry said on Thursday, marking a new addition to the country’s Shariah-compliant debt instruments.

The Sukuk, issued through an auction process in collaboration with the State Bank of Pakistan, Pakistan Stock Exchange and Securities and Exchange Commission of Pakistan, combines two Islamic financing structures — Ijarah Sale and Lease Back (SLB) and Commodity Murabaha.

The hybrid Sukuk allocates 55% of proceeds to Ijarah SLB and 45% to Commodity Murabaha, providing a mix of asset-backed leasing and cost-plus financing structures.

The issuance included a one-year fixed-rate discounted Sukuk and a 10-year variable rental rate (VRR) Sukuk. The one-year instrument was priced at 11.80%, while the 10-year VRR Sukuk was set at 11.7185%.

According to the ministry, the offering attracted bids exceeding the target, with total subscriptions reaching 1.45 times the initial $718 million target.

Officials said the hybrid structure is expected to broaden investor participation and deepen Pakistan’s domestic Islamic debt market.

Khaliq Uz Zaman, director of domestic debt at the Finance Ministry, described the issuance as a milestone for the sector, adding that it could help diversify the investor base and support efforts to reduce borrowing costs over time.

Murabaha structures involve the sale of assets at a disclosed cost plus a profit margin, while Ijarah contracts involve leasing assets in exchange for rental payments.

The issuance comes as Pakistan continues to expand its use of Shariah-compliant instruments to meet government financing needs and develop its Islamic finance ecosystem.