KARACHI: Meezan Bank has advised the Government of Pakistan on the successful issuance of the country’s first short-term sovereign hybrid Sukuk, acting as Joint Financial Advisor on the landmark transaction featuring three-month and six-month tenors.
The issuance, launched by the Ministry of Finance, introduces Pakistan’s first asset-light short-term sovereign hybrid Sukuk and defining moment in the growth of Pakistan’s Islamic financial sector.
The pioneering transaction introduces Pakistan’s first short-term asset-light Sovereign Hybrid Sukuk, combining Ijarah and Commodity Murabaha structures. The instrument offers the Government an innovative sovereign funding solution while strengthening liquidity management for the country’s Islamic banking industry.
The innovative structure was developed through close collaboration between the Ministry of Finance, the State Bank of Pakistan’s Islamic Finance Development Department and a consortium of Islamic financial institutions comprising Dubai Islamic Bank Pakistan, BankIslami and Bank Alfalah Islamic. The successful issuance was further supported by the Pakistan Stock Exchange (PSX), the Central Depository Company of Pakistan (CDC) and the National Clearing Company of Pakistan Limited (NCCPL), which facilitated the issuance, settlement and market infrastructure required for its successful execution.
The three-month Sukuk auction attracted strong investor demand, receiving bids of more than PKR 153 billion against a target of PKR 25 billion. In response, the Government of Pakistan accepted bids with a realised value exceeding PKR 80 billion at a weighted average yield of 11.4413%. Based on the accepted amount, the issuance was oversubscribed by approximately 3.2 times.
The six-month Sukuk auction also generated healthy interest, with bids exceeding PKR 41 billion against the PKR 25 billion target. However, the Ministry of Finance remained within the targeted amount, accepting bids with a realised value of approximately PKR 24 billion at a weighted average yield of 11.5685%.
In addition to the three-month and six-month short-term Sukuk, the Ministry of Finance conducted regular auctions of one-year and 10-year Variable Rental Rate Sukuk. These issuances raised approximately PKR 57.955 billion and PKR 77 billion, respectively, at weighted average yields of 11.7526% and 11.5580%.
As Joint Financial Advisor, Meezan Bank played a pivotal role, working closely with the Ministry of Finance under the guidance of its Shariah Board, in conceptualizing, structuring, and executing this landmark transaction. This pioneering issuance establishes a new benchmark for sovereign Sukuk innovation in Pakistan and represents another important step in advancing the country’s Islamic finance ecosystem.