ISLAMABAD: The government has decided to tap the domestic capital market by issuing Pakistan’s first Sustainable Investment Sukuk. This major move aims to raise funds for three clean energy projects that urgently need an additional Rs52 billion for completion.
The bonds will be floated under the newly approved Sustainable Investment Sukuk Framework. The federal cabinet gave its nod to the framework earlier this month. Officials from the finance ministry said the size of the first Sukuk issue could be around Rs30 billion.
According to sources, the funds raised through this Sustainable Investment Sukuk will finance the ongoing construction of three major projects: the Garuk Storage Dam in Balochistan, the Nai Gaj Dam in Sindh, and the Shagarthang Hydropower Project in Skardu. All three projects are already underway but require substantial additional funding to reach completion.
This will be the government’s first green Sukuk. Previously, the Water and Power Development Authority (WAPDA) issued a similar Sukuk in 2021, raising Rs6.4 billion for the Tarbela Dam extension.
The Garuk Dam, located in District Kharan, Balochistan, has seen its costs soar to nearly Rs28 billion due to project delays and expanded scope. The government now needs about Rs5 billion more to finish the project.
Similarly, the Nai Gaj Dam project in Khairpur Nathan Shah, Sindh, was first inaugurated in 2005. Due to significant delays, the government now requires Rs22 billion to complete the remaining work.
The Shagarthang Hydropower Project has also been approved. It needs Rs25 billion to generate 26 megawatts of electricity, enough to light up Skardu city and nearby areas.
Finance ministry officials explained that the asset-backed nature of the Sustainable Investment Sukuk ensures financing for tangible projects aligned with Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) standards.
The government plans to continue issuing a series of bonds, including Green Sukuk, Social Sukuk, and Sustainability Sukuk. These instruments will finance eco-friendly and social development projects across the country. All projects must align with the National Adaptation Plan, Climate Change Policy, Nationally Determined Contributions, and the Climate Finance Strategy.
Potential projects eligible for funding include solar, wind, hydroelectric, and biomass energy ventures. Projects that reduce carbon emissions, improve air and water quality, enhance energy efficiency, or modernize energy grids can qualify under the Sustainable Investment Sukuk program.
Moreover, cleaner transport initiatives like electric and hybrid vehicles and public transportation systems can be funded. The government may also use these bonds to support low-cost housing and essential infrastructure such as roads and schools in underprivileged regions.
The new framework outlines that the Planning Commission will propose potential green, social, and sustainable projects. Each project must strictly fall within the defined categories and show clear alignment with the framework’s goals.
Additionally, the funding requirement for a proposed project must be equal to or exceed the value of the planned Sukuk issue. If a project has no pending financial needs but the government wants to refinance existing debt, the bond can still be issued against its assets.
A joint committee will oversee project evaluation and selection. Members will come from the Ministry of Finance, Ministry of Planning, Ministry of Climate Change and Environmental Coordination, Ministry of Economic Affairs, and the State Bank of Pakistan.
This evaluation committee will assess proposed projects based on approved criteria. It can also create internal standards and quantify expected benefits for project selection.
The government hopes that the Sustainable Investment Sukuk initiative will attract both local and international investors. This step will not only fund green projects but also improve public health and boost infrastructure development in underserved communities.
