Pakistan on Friday launched its first Sovereign Domestic Green Sukuk valued at Rs30 billion at the Pakistan Stock Exchange (PSX), to fund climate-resilient and new energy projects in the country.
Speaking via video link during the launch event, Finance Minister Muhammad Aurangzeb said the new Sukuk signals growing investor trust in Pakistan’s economy and capital markets.
The Green Sukuk—an Islamic bond designed to finance environmentally sustainable projects—is being framed as a key tool in Pakistan’s transition towards long-term, lower-cost borrowing. “In this regard, you will be hearing about various innovative funding products for domestic as well as for international investors,” Aurangzeb told participants, hinting at an ambitious debt diversification drive.
The three-year Sukuk is structured on an Ijarah basis with a variable rental rate and is issued under the Sustainable Investment Sukuk framework.
The finance minister revealed that the government had already initiated the process of converting short-term debt instruments such as Treasury Bills into long-tenor, lower-cost options like Pakistan Investment Bonds (PIBs).
Proceeds from the issuance will be directed toward funding eligible green energy initiatives, including the construction of three dams. Meezan Bank serves as the lead joint financial advisor, working alongside Dubai Islamic Bank, Bank Islami, and Alfalah Islamic.
The finance minister said that through the Green Sukuk, Pakistan is increasing the share of Shariah-compliant financing in the country’s domestic debt to 14%. With Pakistan’s total domestic debt reaching Rs37 trillion, approximately Rs5 trillion—about 14% —is now comprised of Sukuk-based instruments.
The auction is open to a wide range of investors, including local retail, institutional and corporate investors, non-resident Pakistanis (NRPs), Roshan Digital Account holders, and foreign investors.
The launch coincided with Youm-e-Tashakur (Thanksgiving Day) and came shortly after the PSX reached a record high of 119,961.91 points. Aurangzeb expressed optimism, stating, “The best is yet to come for both PSX and Pakistan,” citing positive feedback from global investors during his recent visit to London.
The finance minister also noted strong international investor interest contingent on continued macroeconomic stability and ongoing reforms in energy, taxation, and state-owned enterprises.
“We want to follow the Malaysian model [of debt restructuring], and there is much to learn from it,” said Aurangzeb, although he stopped short of elaborating on specific steps. He also noted that the domestic buy-back of T-bills and their replacement with PIBs was an early example of this pivot. In 2024, SBP Governor Jameel Ahmad had reported that the government’s reliance on short-term T-bills had dropped from 24% to 21% of its debt mix, with further declines expected.
He added that the government is consulting stakeholders ahead of the FY26 budget to present a promising economic plan.
Speaking at the event, Khurram Schehzad, Advisor to the Finance Minister, said macroeconomic indicators have started to improve. He noted that the country’s debt-to-GDP ratio has come down to 65% from 74%, while the tax-to-GDP ratio has improved to 10.6% from 9.5% just 15 months ago, with expectations to reach 11% by FY26.
However, Schehzad cautioned that climate change and rapid population growth remain the two most pressing challenges for Pakistan’s long-term economic stability.
Looking ahead, Schehzad disclosed that Pakistan is preparing to issue a Panda Bond—a renminbi-denominated bond in the Chinese market—in the final quarter of 2025 as part of its international fundraising efforts.
