In a significant development aimed at bolstering domestic liquidity and diversifying debt instruments, the State Bank of Pakistan (SBP) has announced the successful completion of an outright purchase auction of Government of Pakistan (GOP) Ijara Sukuk (GIS-VRR-19) on a deferred payment basis, known as Bai Muajjal. The transaction, concluded through a well-subscribed auction, resulted in a total raise of Rs78.2 billion.
According to the official results released by the SBP, the auction specifically targeted Sukuk with a tenor of 1,067 days. The auction attracted total bids amounting to Rs66.2 billion for this particular duration, signaling considerable investor interest in Shariah-compliant, government-backed instruments. Despite the high volume of interest, the government accepted Rs53.7 billion in face value terms, reflecting a selective approach in line with its borrowing strategy and pricing benchmarks.
The accepted bids for the 1,067-day Sukuk cleared at a cut-off deferred price of Rs145.64 per unit. The bidding window reflected a price range that varied between Rs143.56 and Rs149.94, showcasing a healthy spread that underscores diverse investor valuations and expectations for returns over the medium term.
Interestingly, while the 1,067-day Sukuk was successfully subscribed and executed, no bids were received for the shorter 336-day tenor. This absence of bids for the short-term paper may indicate a current preference among investors for longer-term, Shariah-compliant instruments that provide more stable returns in the prevailing interest rate and inflationary environment.
The Bai Muajjal structure used in this auction allows the government to acquire Sukuk immediately, while deferring the payment to a future date. This arrangement is widely used in Islamic finance to comply with Shariah principles, particularly the prohibition on interest-based transactions. In this case, it enables the SBP and the Ministry of Finance to manage fiscal requirements without violating Islamic financial norms.
This auction is part of the broader strategic framework employed by the SBP to manage liquidity, develop Islamic capital markets, and provide diverse instruments to cater to varying investor preferences. Government Ijara Sukuk have long been favored by both domestic and international investors looking for sovereign-backed, Shariah-compliant investment options with predictable cash flows and lower credit risk.
The issuance also plays a critical role in the broader policy of financial inclusion and the promotion of Islamic banking in Pakistan. As demand for Shariah-compliant instruments continues to grow, particularly among institutional investors such as Islamic banks, takaful companies, and pension funds, the SBP’s commitment to structuring and executing such instruments becomes increasingly important.
Furthermore, the continued use of long-tenor Sukuk indicates the government’s intent to lock in funds at current rates, potentially in anticipation of future shifts in market dynamics or monetary policy stances. It also sends a positive signal about the health of Pakistan’s Islamic finance ecosystem and the central bank’s proactive measures in maintaining a balance between conventional and Islamic financial operations.
With the success of this auction, market analysts and investors will be closely monitoring future issuances, especially as the government navigates its fiscal roadmap and seeks to deepen the Islamic debt market. The move is not only a testament to growing investor confidence but also highlights the evolving sophistication and reach of Pakistan’s financial architecture.