Pakistan’s government Sukuk portfolio has crossed Rs10 trillion, Finance Minister Muhammad Aurangzeb announced on Thursday, after issuance more than doubled in a single year. But the milestone arrives with two gaps the minister himself named. The latest Sukuk auction raised only Rs70 billion against a target of Rs250 billion, and foreign investors are still largely staying away.
The Rs10 trillion ledger
Meezan Bank hosted the gathering in Islamabad on Thursday, with Aurangzeb as chief guest and State Bank Governor Jameel Ahmad also speaking, alongside the Ministry of Finance and the joint financial advisers Dubai Islamic Bank (Pakistan), BankIslami Pakistan and Bank Alfalah.
Between January and 31 October, the government issued Sukuk worth Rs4.179 trillion, more than double the record Rs2.052 trillion issued in all of 2025. The finance ministry’s own post put 2026 issuance higher still, at Rs4.4 trillion, up 113 per cent from about Rs2 trillion last year. The minister said the sector had grown by about 22 per cent a year over five years, from about Rs761 billion.
The Rs10 trillion portfolio is worth about $36 billion at the USD to PKR exchange rate today. The figure covers both the outstanding stock of Sukuk and total issuances, which have now both passed the mark.
The auction that took less than a third
The milestone was celebrated a day after the government’s latest hybrid Sukuk auction, held through the Pakistan Stock Exchange auction system on 11 November, raised only Rs69.955 billion against a combined target of Rs250 billion. That is about 28 per cent of what the government had aimed to raise, with settlement due on 12 November.
The shortfall was not for want of buyers. Investors offered Rs392.374 billion for the fixed-rate discounted Sukuk, against a target of Rs150 billion, and Rs325.94 billion for the 10-year variable rental rate Sukuk, against a target of Rs100 billion. Together, offers totalled Rs718.314 billion. The government accepted less than one rupee in ten, turning away about Rs648 billion rather than paying the yields asked.
In the discounted auction, the one-year tenor led acceptances at Rs27.795 billion, at a cut-off yield of 12.43 per cent, followed by the three-month tenor at Rs19.606 billion and the six-month tenor at Rs4.2 billion. A further Rs7.287 billion came through non-competitive bids. In the 10-year variable rate reopening, only Rs11.068 billion was accepted against the Rs100 billion target, at a cut-off yield of 12.3624 per cent.
The auction ran through the PSX system a day before the KSE-100 fell 1,710 points on Thursday.
Foreign investors are still on the sidelines
Aurangzeb told reporters on Thursday that foreign investment in Sukuk remained underwhelming, even though foreign money has been flowing into Treasury bills and Pakistan Investment Bonds. He asked banks, brokers and primary dealers to promote the instruments to international investors.
The minister’s answer to the gap has two parts. The first is retail: expanding Sukuk through digital and telecom platforms so ordinary citizens can invest from as little as Rs5,000. The second is corporate: the Ministry of Energy has ordered the National Grid Company, a state-owned utility, to issue its first listed Sukuk, to set a benchmark other companies can follow.
What a Sukuk is, and why the number matters
A Sukuk is the government’s Shariah-compliant way of borrowing. Instead of paying interest, the government pays investors a rental or profit share linked to an underlying asset. Government Sukuk have been issued mainly under the Ijarah structure since 2008, and the finance ministry and the State Bank have now added hybrid structures that align with different Shariah principles.
The minister says the issuance has helped stretch the maturity of government borrowing and reduce financing costs. The launch of tradable three-month and six-month Sukuk has also filled a gap at the short end of the sovereign Islamic yield curve, giving the wider Islamic finance market benchmarks to price against.
The Sukuk push is part of a wider pitch for investment. At the minerals forum in Islamabad the same week, Punjab’s chief minister said Punjab’s rivers hold gold.
What to watch next
Three tests will show whether the milestone becomes a habit. The next auction will test whether the government accepts more of what investors offer, and at what yield. The minister’s foreign-investor push will be judged by whether overseas buyers appear in the bidding. And the retail and corporate tests, a Rs5,000 entry point on digital platforms and the National Grid Company’s first listed Sukuk, will show whether the market grows beyond banks and institutions.
For now, the ledger reads two ways. Pakistan has built a Rs10 trillion Islamic bond market, but its latest auction took less than a third of its target, and the foreign buyers the minister wants have yet to arrive.
