By Farooq Awan
Pakistan plans to establish an Asset Registry Company (ARC) and significantly expand sovereign Sukuk issuance as part of an ambitious strategy to build a comprehensive Shariah-compliant public finance infrastructure ahead of the country’s transition to a Riba-free financial system after 2027.
According to the Post-2027 Financial System in Pakistan strategy paper, available with Wealth Pakistan, the development of a robust Shariah-compliant public finance system has been identified as the single most critical milestone for ensuring a smooth transition to the post-2027 financial architecture. The strategy notes that without a well-developed Islamic public finance framework, the broader transformation of Pakistan’s financial sector would be difficult to achieve.
To support the transition, the government plans to introduce a diverse range of Shariah-compliant financing instruments with short-, medium- and long-term maturities while strengthening the supporting financial market infrastructure. The proposed framework includes the development of an efficient Islamic money market, enhanced Shariah-compliant open market operations by the State Bank of Pakistan (SBP), and a vibrant Islamic interbank market to facilitate the placement and management of surplus liquidity among financial institutions.
A major breakthrough highlighted in the strategy is the development of a hybrid Sukuk structure based on Ijarah-cum-Murabaha, jointly designed by the federal government, SBP and leading Islamic banking institutions. The structure has already received approval from the SBP’s Shariah Advisory Committee, the country’s highest Shariah body for Islamic finance. According to the strategy, the innovative structure enables the government to issue Sukuk worth nearly twice the value of the underlying assets, substantially increasing its capacity to mobilise funds through Islamic instruments.
The document notes that Pakistan has already taken the first practical step under this framework through the issuance of the country’s first hybrid Sukuk worth Rs109 billion on April 17, 2026. The Sukuk was issued with one-year and ten-year maturities and is expected to serve as the foundation for future sovereign Islamic debt issuances.
Another cornerstone of the strategy is the proposed establishment of the Asset Registry Company, a wholly federal government-owned entity that will operate under the Finance Division. The company will maintain a comprehensive register of non-current assets owned by the federal government and its unlisted entities, creating a dedicated asset pool to support regular sovereign Sukuk issuance.
According to the strategy, the asset register will contain detailed information on government-owned assets, including ownership status, location, size, quantity, book value, market value, encumbrances and the value of unencumbered assets. The government believes such a centralised registry will provide greater transparency and enable the regular mobilisation of public assets for Shariah-compliant financing without disrupting their normal use.
The document clarifies that assigning assets to the Asset Registry Company will not transfer operational control of those assets. They will remain under the control of the respective government departments and entities and will continue to be reflected in their financial statements, with appropriate disclosure indicating that they have been assigned to the ARC solely for Sukuk issuance purposes.
The strategy says the government will soon seek formal cabinet approval for establishing the Asset Registry Company and assigning eligible federal assets to it. Once operational, the mechanism is expected to provide the government with greater flexibility to issue Sukuk regularly by using portions of the overall asset pool instead of relying on individual assets for every issuance. The proposed issuance mechanism has already been approved by the SBP’s Shariah Advisory Committee.
With the hybrid Sukuk structure and the Asset Registry Company in place, the Debt Management Office plans to introduce a broader range of Shariah-compliant investment instruments to meet the liquidity management and investment requirements of banks, non-banking finance companies, Takaful operators, pension funds and other institutional investors. The strategy also envisages the issuance of Sukuk across various maturities to deepen Pakistan’s Islamic capital market and improve liquidity management throughout the financial system.
The document further notes that expanding sovereign Sukuk issuance will support the government’s objective of increasingly financing its domestic borrowing requirements through Shariah-compliant instruments after 2027. A wider range of Islamic securities is also expected to strengthen financial market development by providing banks and other financial institutions with additional investment and liquidity management options while supporting the country’s broader transition to a Riba-free financial system.
Credit: INP-WealthPk