Pakistan on Friday launched its first Green Sukuk, valued at Rs. 31.9 billion, at the Pakistan Stock Exchange (PSX), part of commitments to the International Monetary Fund (IMF) to raise funding for climate-resilient and new energy projects in the country.
Prior to the issuance, the government had set a target of Rs. 30 billion. It managed to surpass it, seeling Green Sukuk of Rs. 31.99 billion. The Green Sukuk refers to an Islamic bond designed to finance environmentally sustainable projects. It is fully compliant with Shariah principles and aims to foster long-term sustainability in the development sector. Finance Minister Muhammad Aurangzeb has framed it as a key tool in Pakistan’s transition towards long-term, lower-cost borrowing.
According to the Finance Division, the response from financial institutions and securities companies has been overwhelming. It pointed to overall bids received amounting to Rs. 161.74 billion.
Proceeds from the green bonds would be directed toward climate change-related projects. The IMF would monitor both the fundraising process and project execution. The lender, last week, approved $1.4 billion for Pakistan under the new Resilience Sustainability Facility.
The finance minister said that through the Green Sukuk, Pakistan is increasing the country’s share of Shariah-compliant financing in domestic debt to 14%, or roughly Rs. 5 trillion.
The funds raised through this Green Sukuk would be allocated to green, sustainable, and social projects contributing to environmental sustainability. These might include renewable energy projects, green infrastructure, and other initiatives approved by the Project Evaluation and Selection Committee based on their environmental benefits.
The tentative list of Green Projects to be financed through Green Sukuk are the construction of the Garuk Storage Dam; the Naigaj Dam Project; and a 26MW Shagarthang Hydro Power Project in Skardu.