The Government of Pakistan on Wednesday raised Rs. 171 billion through its latest Ijarah Sukuk auction, though fell short of its Rs. 200 billion target despite robust investor participation totaling Rs. 475 billion.
According to official data, Rs. 164 billion of the Rs. 171 billion raised came from competitive bids, while Rs. 6 billion from non-competitive bids. It said the one-year discounted Ijarah Sukuk was issued at a cut-off rental rate of 10.45%, up 46 basis points from the previous auction on July 23.
The floating-rate Sukuk saw mixed results. The three-year Government Ijarah Sukuk (GIS) FRR was issued at a rental rate of 10.44%, up 21 basis points, while the five-year GIS FRR saw a three basis points decrease to 10.91%. The 10-year GIS FRR remained unchanged at 11.99%.
Analysts attribute the uptick in rental rates to market expectations of persistent inflationary pressures and cautious fiscal management.
The GIS offers a Shariah-compliant alternative to conventional debt instruments such as Market Treasury Bills and Pakistan Investment Bonds. Unlike traditional Government Debt Securities, GIS adhere to Islamic finance principles, making them a distinct option for faith-based investors.
Globally, Sukuk have gained significant traction as a core Islamic financial instrument. By the end of 2023, Sukuk accounted for 24.94%, or $842 billion, of the Islamic finance industry’s total assets, according to industry reports. The global Sukuk market expanded by 16% in 2023, adding $212 billion in value.