Pakistan plans to raise Rs. 52 billion through the issuance of the country’s first sustainable investment Sukuk bonds. This innovative debt instrument will help fund three critical clean energy projects currently under construction.
The Government of Pakistan is set to make a landmark entry into sustainable finance by issuing its first-ever Green Sukuk bonds, aiming to raise Rs 52 billion from the domestic capital market. This initiative, under the newly approved Sustainable Investment Sukuk Framework, seeks to bolster the country’s renewable energy infrastructure and meet its climate adaptation goals.
The inaugural Sukuk issuance, expected to be worth around Rs 30 billion, will finance three energy-related infrastructure projects already in progress: the Garuk storage dam in Balochistan, the Nai Gaj dam in Sindh, and the Shagarthang hydropower project in Skardu. These projects face significant funding shortfalls, and the green Sukuk is expected to close the financial gap and accelerate their completion.
“This is a critical step forward in aligning Pakistan’s development financing with environmental and social objectives,” a senior finance ministry official said. “The asset-backed nature of these Islamic bonds allows for direct investment in tangible, measurable Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) outcomes.”
Climate-Conscious Investment Strategy
The Garuk Dam project, located in Balochistan’s Kharan district, has witnessed a sharp escalation in costs, now estimated at Rs 28 billion due to construction delays and expanded scope. The government is seeking an additional Rs 5 billion to complete it. Similarly, the Nai Gaj Dam in Khairpur Nathan Shah, which has been under construction since its 2005 inauguration, requires Rs 22 billion to wrap up pending work.
The Shagarthang hydropower plant, a newly approved initiative, is designed to generate 26 megawatts of electricity—enough to meet the energy needs of Skardu city and surrounding areas. It requires Rs 25 billion in funding.
The issuance of these Sukuk bonds will mark Pakistan’s first government-backed foray into green Islamic finance. Previously, in 2021, the Water and Power Development Authority (WAPDA) had issued a Rs 6.4 billion Sukuk for the Tarbela Dam extension. However, this is the first time the federal government will directly tap capital markets through a sustainable finance mechanism.
Framework for Sustainability and Accountability
Approved earlier this month by the federal cabinet, the Sustainable Investment Sukuk Framework lays out a clear path for identifying, evaluating, and financing projects that contribute to environmental and social goals. The Planning Commission will propose potential green, social, and sustainable projects. These will be evaluated by a cross-ministerial committee including representatives from the Ministries of Finance, Planning, Climate Change, and Economic Affairs, along with the State Bank of Pakistan.
According to the framework, eligible projects must demonstrate alignment with Pakistan’s National Climate Change Policy, the National Adaptation Plan, Nationally Determined Contributions under the Paris Agreement, and the National Climate Finance Strategy.
Eligible categories include renewable energy (solar, wind, hydro, and biomass), sustainable transportation, water and air quality improvement, low-emission infrastructure, and low-cost housing. Green Sukuk can also support electric vehicles, hybrid public transport, and development of schools and roads in underserved areas.
“The flexibility of this framework allows the government to either finance new projects or refinance existing ones by repaying earlier debt from other internal or external sources,” explained a finance ministry official.
Mobilising Capital for Climate-Resilient Growth
The government sees these Sukuk bonds as a means of mobilising both domestic and international investment in critical infrastructure while adhering to Islamic finance principles. Green Sukuk, Social Sukuk, and Sustainability Sukuk will serve as diverse instruments under the broader umbrella of sustainable finance, each tailored to different categories of developmental priorities.
By focusing on asset-backed financing, the government aims to reduce reliance on traditional donor-driven models and enhance project ownership and transparency. Moreover, the Sukuk will help meet Pakistan’s commitments under global climate frameworks while addressing acute infrastructure needs in energy-deprived and climate-vulnerable regions.
Finance ministry officials expressed optimism that these instruments could significantly expand Pakistan’s green financing ecosystem, paving the way for future investments in climate adaptation, renewable energy, and social welfare infrastructure.
“This is more than just a financial product. It is a strategic shift toward responsible, forward-looking development,” said a senior official. “We hope to create a replicable model that other developing countries with similar economic and environmental challenges can follow.”
The green Sukuk is expected to be floated in the coming months, once final project evaluations are completed. If successful, the government plans to roll out additional tranches under the sustainable investment framework, setting the stage for a more resilient, equitable, and environmentally conscious Pakistan.
