Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb said Pakistan’s Sukuk market has grown at a compound annual growth rate of around 22%, but foreign investment in Sharia-compliant instruments remains underwhelming and needs to be promoted, it was reported on Thursday.
The finance minister expressed these views while addressing a ceremony marking the achievement of Rs10 trillion in Sovereign Sukuk, alongside the issuance of Hybrid and Short-Term Sukuk.
“It is not about the absolute numbers that we are celebrating today, but the efforts taken to diversify the Sukuk market and introduce greater flexibility in sovereign financing instruments,” he said.
Sukuk, also known as Islamic bonds, are financial instruments that comply with Islamic law (Shariah) and its investment principles. Unlike traditional bonds, which represent debt and pay interest, Sukuk represents ownership in a tangible asset or a pool of assets. Investors in Sukuk receive a share of ownership or profits generated by these underlying assets, rather than just receiving interest payments.
He highlighted the introduction of hybrid government Sukuk, developed by the Ministry of Finance Debt Management Office in conjunction with the State Bank of Pakistan, as an important development. “This instrument combines different Sharia-compliant structures and provides greater flexibility in the use of government-owned assets.”
Another key step, he said, was the introduction of shorter-tenor Sukuk, including three- to six-month instruments. “This was a big gap in the market and was an important step towards developing a credible Sharia-compliant yield curve across different maturities.”
Despite the progress, Aurangzeb said foreign investment in recent months in Sukuk remained below potential.
“Foreign investment in Sukuk quite frankly remains underwhelming,” he said. “Therefore, there is a need to highlight and actively promote Sukuk among international investors and diversify foreign portfolio investment into Sharia-compliant instruments.”
