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Monday, June 17, 2024

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Pakistan eyeing to join exclusive green sovereign Sukuk issuer club this year

Finance Minister Muhammad Aurangzeb has confirmed that the Pakistani government is working on issuing local currency green Sukuk by December to fund projects earmarked for sustainable development. If the offer materializes, it will make the Republic one of only three governments in the world to have tapped the green Sukuk market.

Muhammad did not reveal further details such as tenor and assets, but the minister did acknowledge that the government needs a better portfolio of green investment projects.

Pakistan is one of the most climate-vulnerable countries in the world as its monsoon seasons have become increasingly harsh causing devastating fatal floods in recent years, exacerbating food insecurity for over 14 million people.

The World Bank warned late last year that severe weather-related events, environmental degradation and air pollution could cost Pakistan 18—20% of its GDP by 2050.

The Republic of 250 million-strong have been trying to turn to climate finance to address its urgent sustainability concerns. In 2021, it along with the United Nations Development Programme, Canada, the UK, and Germany said it wants to establish a ‘Nature Performance Bond’, although that did not transpire.

Apart from the quasi-sovereign US$500 million green Eurobond offering back in 2021 by the Water and Power Development Authority, the Pakistani government has never tapped the debt capital markets to fund climate-related projects.

This upcoming Sukuk could end that drought and put Pakistan in the league of sovereign sustainability Sukuk issuers alongside Indonesia and Malaysia.

IFN Sustainable learned that the government was mulling a green Sukuk last August when it appointed banks to advise on a sovereign offering which could include a green paper. Although at that time, practitioners were largely under the impression that the government had no immediate plans to tap the green market.

It seems that the tune has changed under the leadership of veteran banker Muhammad, who took over the post of Pakistan’s top finance man in March. Muhammad was previously leading one of the country’s largest commercial banks, Habib Bank, after a stint with JPMorgan.

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