Qudsia Bano

The Securities and Exchange Commission of Pakistan (SECP) has played a crucial role in transforming the government debt market by facilitating Sukuk auctions through the Pakistan Stock Exchange (PSX). Experts have termed this initiative a game changer for market transparency, enhancing investor confidence and expanding participation in the financial sector.

Since December 2023, the SECP has supported the government in conducting 18 auctions, raising Rs2.25 trillion through Ijarah Sukuk. Market participants, including banks, mutual funds, and brokers, have widely welcomed the move from an over-the-counter trading system to an exchange-based mechanism. Financial experts believe this transition will significantly improve price discovery, ensure fair competition, and make the market more accessible.

Dr Ahsan Raza, a financial expert and former SBP official, highlighted that the SECP’s initiative is a landmark step toward financial market development in Pakistan. He stated that the traditional debt market lacked transparency, with limited participation and price manipulation concerns. The introduction of Sukuk auctions via PSX has addressed these issues by ensuring real-time price discovery, standardisation, and broader access for investors. He emphasised that this shift will enhance market liquidity as well as attract institutional and retail investors, ultimately reducing reliance on a few large players that previously dominated the debt market.

Dr Syed M Abdul Rehman, former Shariah adviser at SECP, praised the commission’s efforts in making the debt market more efficient and competitive. He pointed out that the lack of a transparent trading mechanism in the past led to inefficiencies and uncertainty among investors. “By bringing government Sukuk trading onto an electronic platform, the SECP has ensured confidentiality in bids, improved oversight, and enabled better price determination.”

He further explained that this move would positively impact tax collection, government borrowing costs, and overall investor sentiment. Rehman believes that further enhancements, such as allowing foreign participation and integrating digital platforms, could elevate Pakistan’s Sukuk market to international standards.

The SECP remains committed to fostering a competitive and transparent financial environment, ensuring that both the government and investors benefit from an efficient debt market. Experts believe that if these reforms continue, Pakistan’s Sukuk market could set new benchmarks in Islamic finance and serve as a model for other emerging economies.

Credit: INP-WealthPk