The Government of Pakistan has successfully mobilized Rs208.98 billion through the latest auction of Government Ijarah Sukuk (GIS) via the Pakistan Stock Exchange’s (PSX) auction platform. The transaction, which targeted Rs200 billion, witnessed overwhelming investor participation with total bids crossing Rs932 billion — almost 4.7 times the initial target.
The fundraising exercise underscores the growing strength of Pakistan’s Islamic finance market and investor confidence in government-backed Shariah-compliant instruments. Sukuk, structured to comply with Islamic finance principles, have become a key component of Pakistan’s strategy to diversify its funding base while attracting both domestic and international investors.
The auction saw particularly strong demand for short and medium-term instruments, with the 1-year discounted Ijarah Sukuk standing out. Bids worth Rs229.13 billion were received against a Rs50 billion target. Out of this, the government accepted Rs73.48 billion in competitive bids and Rs1.69 billion in non-competitive bids, raising a total of Rs75.17 billion. The cut-off rental rate was set at 10.43% with a cut-off price of 90.58, reflecting investor appetite for near-term paper.
In the medium-term category, the 3-year fixed rental rate (FRR) Sukuk attracted Rs71.56 billion in bids, allowing the government to raise Rs61.79 billion against its Rs25 billion target. The cut-off rental rate was finalized at 10.75% with the instrument issued at par value. Similarly, the 5-year FRR Sukuk drew Rs112.75 billion in offers, of which Rs51.56 billion was raised against a Rs25 billion target. The cut-off rental rate stood at 11.14%, again issued at par value, reflecting sustained demand for instruments in this maturity bracket.
However, longer-tenor instruments presented a mixed picture. The government rejected all Rs232.3 billion in bids for the 10-year zero-coupon Sukuk, despite the strong demand. Officials opted to maintain fiscal discipline, suggesting that the offered pricing was not aligned with the government’s funding strategy. Similarly, the 5-year variable rental rate (VRR) Sukuk, which attracted Rs107.36 billion in bids, also saw complete rejection.
The 10-year VRR Sukuk, however, found some success. It received Rs179.48 billion in bids, from which Rs20.46 billion was accepted against a Rs50 billion target. The accepted bids carried a margin of 100 basis points, with the cut-off price set at par value.
Overall, the government accepted Rs206.54 billion in competitive bids and Rs2.44 billion in non-competitive bids, raising Rs208.98 billion in total — slightly above its planned Rs200 billion target. While investor interest remained high across all maturities, the selective acceptance of bids indicates a cautious approach by the Ministry of Finance to balance funding requirements with long-term cost sustainability.
The outcome of this auction reflects two key trends: a continued shift by investors toward Islamic finance products, and the government’s focus on maintaining discipline even amid oversubscription. With Pakistan’s Islamic banking sector growing rapidly and government sukuk providing risk-free instruments, demand for such products is expected to remain strong in future issuances.
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