Govt to raise Rs52bn through Green Sukuk Bonds for three clean energy projects

The federal government has approved the issuance of its first green Sukuk bonds under a new framework designed to raise debt for sustainable and social projects. The bonds are expected to raise around Rs52 billion, with the funds earmarked for completing three ongoing projects in the energy sector, The Express Tribune reported.

The proceeds from the Sukuk issuance will be used to finalise the construction of the Garuk Dam in Balochistan, the Nai Gaj Dam in Sindh, and the Shagarthang hydropower project in Skardu, which collectively need an additional Rs52 billion for completion. 

The bonds will be backed by assets related to these projects and will contribute to the achievement of Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) impacts, according to officials from the Ministry of Finance.

The size of the first Sukuk might be in the range of Rs30 billion. The issuance of the Sukuk bonds follows a broader initiative to promote the use of Islamic finance principles to fund projects that support Pakistan’s National Adaptation Plan and Climate Change Policy. 

The Garuk Dam project, located in Balochistan’s District Kharan, has faced cost overruns, with the project’s price tag rising to approximately Rs28 billion due to delays and an expanded scope of work. 

The Nai Gaj Dam project in Sindh also requires additional funds, with Rs22 billion needed for completion. 

The Shagarthang hydropower project, which will help provide electricity to Skardu and surrounding areas, is expected to cost Rs25 billion.

According to the report, the Sukuk issuance will help address the funding gap for these projects, with the government keen to use the proceeds for energy infrastructure development and environmental sustainability. 

The joint committee overseeing the project evaluation and selection will include representatives from the Ministry of Finance, the Ministry of Planning, the Ministry of Climate Change, the Ministry of Economic Affairs, and the State Bank of Pakistan. The committee will review proposals for new projects based on their alignment with the government’s sustainability goals.