By Bilal Ahmed  |  13 November 2026

Pakistan’s Sukuk Cross Rs10 Trillion: Issuance Up 113% in 2026, But Foreign Investors Stay Away

Pakistan’s sovereign Sukuk portfolio has crossed Rs10 trillion — about $36 billion — for the first time, Finance Minister Muhammad Aurangzeb announced on Thursday. Issuance of the Sharia-compliant bonds has surged 113% this year, yet the minister admitted foreign investment in Sukuk remains “underwhelming” and urged banks and brokers to sell them to overseas buyers.

The milestone was marked at a ceremony in Islamabad hosted by Meezan Bank, with State Bank of Pakistan (SBP) Governor Jameel Ahmad also in attendance. The government sold Rs4.179 trillion of Sukuk between January and 31 October 2026 — already more than double the previous full-year record of Rs2.052 trillion set in 2025. The finance minister put total 2026 issuance at Rs4.4 trillion, up 113% from about Rs2 trillion last year.

Sukuk are Islamic bonds: certificates backed by tangible assets that pay returns without interest, making them compliant with Sharia principles. For a government that borrows heavily to fund its budget, they have become one of the most important sources of financing — and the Rs10 trillion figure, covering both the outstanding portfolio and cumulative issuances, shows how far the market has come in less than two decades.

How Fast Sukuk Issuance Has Grown

The numbers tell a story of rapid expansion. In 2020, the government issued about Rs761 billion of Sukuk. By 2025, the annual figure had reached roughly Rs2 trillion — itself a record at the time. In the first ten months of 2026 alone, issuance hit Rs4.179 trillion, more than double the whole of last year. Over five years, that works out to a compound annual growth rate of around 22%.

The growth reflects a deliberate shift in how Pakistan funds itself. Sukuk are now a mainstream part of the government’s borrowing programme rather than a niche product, and the domestic Islamic banking sector — led by institutions such as Meezan Bank — has built the distribution network to absorb them. The ceremony also recognised the contributions of the SBP and the joint financial advisers — Dubai Islamic Bank (Pakistan), Bank Islami Pakistan and Bank Alfalah — who worked on the issuances.

For ordinary savers, the growth matters because Sukuk give the government a Sharia-compliant way to borrow from the public and institutions, rather than relying only on conventional interest-bearing bonds. The government has issued Sukuk mostly under the Ijarah structure since 2008, which ties each issue to tangible state assets.

The Foreign-Investor Problem

The one weak spot in the story is foreign participation. Aurangzeb was unusually blunt about it: inflows through special convertible rupee accounts into Treasury bills and Pakistan Investment Bonds have been positive over the past few months, he said, but “quite frankly, foreign investment in Sukuk remains underwhelming.”

That is the gap the government now wants to close. The minister urged banks and brokers to market Sukuk to foreign investors, and pledged to broaden both retail and foreign participation in the market. The pitch is straightforward: Pakistan’s Sukuk offer exposure to a sovereign borrower through a Sharia-compliant instrument, at a time when Islamic finance is growing globally. But foreign funds have so far stayed largely on the sidelines, and the government has not disclosed a figure for how much of the Rs10 trillion is held overseas.

The contrast with the domestic market is stark. At home, demand has been strong enough to more than double issuance in a year. Abroad, the product is still largely unknown. Closing that gap is now the stated priority — and it is why the milestone ceremony was as much a sales pitch as a celebration.

New Instruments: Hybrid and Short-Term Sukuk

Alongside the milestone, the government has launched two new types of Sukuk. The first is hybrid Sukuk, which combine features of different structures. The second — and more significant for the market — is tradable three-month and six-month short-term Sukuk.

Short-term government paper matters because it fills a long-standing gap at the short end of the sovereign Islamic yield curve. Until now, investors who wanted short-dated Sharia-compliant government securities had few options; the new three- and six-month issues give banks, funds and companies a place to park cash for weeks rather than years, and they provide benchmarks for pricing other Islamic instruments across the market.

For the government, shorter-dated Sukuk also add flexibility: it can raise money for brief periods without locking itself into long-term commitments, and it can test demand at different points on the yield curve.

What Happens Next

The Rs10 trillion milestone is a record, but the government’s own message is that the work is not finished. The next steps are to widen the investor base — retail savers at home and institutional buyers abroad — and to keep the new short-term and hybrid instruments trading actively so they become genuine benchmarks.

Watch for two things in the coming months: whether foreign holdings of Sukuk start to rise, which would show the minister’s sales pitch is working; and whether the government keeps up the pace of issuance into 2027, when the next full-year figures will show if 2026 was a one-off surge or the new normal for Islamic finance in Pakistan.

This article is for information only and is not investment advice.

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