Pakistan’s government has revised the auction targets for selected government Sukuk, reducing the target size of its three-year fixed rental rate hybrid Sukuk and 10-year fixed-rate zero-coupon Ijarah Sukuk to Rs25 billion each. The previous targets for both instruments stood at Rs50 billion. The revision was communicated through an updated Pakistan Stock Exchange notice issued on October 6 following advice from the Debt Management Office, while the target for the five-year hybrid Sukuk remains unchanged at Rs50 billion.
Under the revised auction structure, the three-year fixed-rate hybrid Sukuk will have a target size of Rs25 billion, compared with the earlier Rs50 billion target. The five-year hybrid Sukuk will continue to carry a target of Rs50 billion. Both hybrid instruments are scheduled to have an issue date of October 8, 2026, with the three-year security maturing on October 8, 2029 and the five-year security maturing on October 8, 2031. The government has retained the previously announced profit rates for the two instruments.
The profit rate for the three-year hybrid Sukuk has been fixed at 12%, while the five-year Sukuk will carry a fixed profit rate of 12.25% for the full tenor. The instruments are structured using a combination of Ijarah sale-and-lease-back and Commodity Murabaha transactions. Under the structure, 55% of the proceeds will be allocated to the Ijarah transaction, while the remaining 45% will be used for Commodity Murabaha. Each Sukuk will carry a face value of Rs5,000.
The three-year and five-year hybrid Sukuk will be issued as fresh securities through a pay-as-you-bid auction methodology. Under this approach, bids submitted at or above the cut-off price accepted by the Ministry of Finance will be considered successful. Profit payments on both instruments will be made semi-annually, providing investors with periodic returns throughout the respective tenors. The securities will also be listed and tradable on the Pakistan Stock Exchange, giving eligible investors an avenue to trade the instruments after issuance.
The government has also reduced the target for its 10-year fixed-rate zero-coupon listed GoP Ijarah Sukuk from Rs50 billion to Rs25 billion. The security is scheduled for issuance on October 8, 2026 and will mature on October 8, 2036. Unlike the hybrid Sukuk, the 10-year instrument will be issued at a discount to its face value. The difference between the issue price and face value will form part of the investor’s return.
The Ijarah rent on the 10-year Sukuk will remain fixed throughout its 10-year tenor and will be determined on the basis of the weighted average yield. The payment will be made at maturity rather than through periodic profit payments. The security will also be listed on the Pakistan Stock Exchange and will remain tradable, allowing investors to hold the instrument until maturity or trade it in the secondary market.
The revised auction notice also sets limits on non-competitive bids by individual investors. For both Sukuk structures, a single investor’s non-competitive bids cannot exceed 0.25% of the relevant auction target or Rs500 million, whichever amount is lower. The PSX has updated the maximum non-competitive bid limit in its auction system following the revision recommended by the Debt Management Office. Other details contained in the earlier October 5 auction notice remain unchanged.
The securities are being issued through Pakistan Domestic Sukuk Company Limited, which is a wholly owned subsidiary of the Ministry of Finance. The eligible investor base includes individuals, institutions, funds, banks, non-bank finance companies, insurance companies, Takaful companies, Roshan Digital Account customers, non-resident Pakistanis, foreign investors and international Islamic financial institutions. The broad eligibility framework allows both domestic and international participants to invest in the government’s Sukuk offerings, subject to the applicable requirements.
Both the hybrid and Ijarah Sukuk will be listed on the Pakistan Stock Exchange and will carry full eligibility for the Statutory Liquidity Requirement under the Government of Pakistan Sukuk Rules. The instruments therefore provide eligible financial institutions with securities that can also contribute toward their statutory liquidity requirements. The revised auction targets will determine the amount offered through the October 8 issuance, while the unchanged terms for the five-year Sukuk and the applicable profit structures remain part of the government’s latest financing programme.
The reduction in the auction targets represents a change in the planned size of the three-year and 10-year offerings rather than a change to their core structures. The government has retained the issue dates, maturity schedules, profit rates and other key terms while lowering the amount targeted through the two securities. The updated notice gives investors the revised amounts ahead of the scheduled October 8 issuance and provides the latest parameters for participation in the government’s Sukuk auction.
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