The Pakistan debt market has seen a major boost as the government successfully raised PKR 2.25 trillion through Ijarah Sukuk since December 2023. This milestone was achieved through 18 auctions, with increasing trading volumes in the secondary market as participants adapt to the new system. The initiative is a result of collaboration between key stakeholders, including the Ministry of Finance (MOF), Debt Management Office (DMO), Securities & Exchange Commission of Pakistan (SECP), State Bank of Pakistan (SBP), capital market institutions (CMIs), banks, mutual funds, and brokers.
A Shift in Government Debt Securities Trading
Previously, Government Debt Securities (GDS) were issued and traded in the over-the-counter market. In December 2023, the MOF, with federal approval, decided to modernize the process by engaging capital market institutions (CMIs) for the issuance, registration, trading, settlement, and transfer of Shariah-compliant GDS. The SECP played a crucial role in supporting and implementing this transition, working closely with the DMO and CMIs.
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Regulatory Reforms and Market Development
Shifting GDS trading to the capital market required several regulatory amendments:
- The Federal Cabinet approved changes to GDS rules.
- CMIs updated regulations and implemented new procedures.
- Banks, mutual funds, and brokers contributed to refining the system.
Over the past few months, SECP-approved measures have strengthened the GDS market, including:
- Brokerage commission rationalization to improve cost efficiency.
- A revaluation mechanism based on broker quotations for fair pricing.
- Same-day settlement for faster transactions.
- Direct access to secondary market trading for banks and mutual funds.
Enhancing Transparency and Efficiency
These reforms aim to improve transparency, competition, and efficiency in Pakistan’s domestic debt market. The initiatives ensure:
- Confidentiality of bids during the auction process.
- Electronic trading platforms for secure transactions.
- A wider distribution network, including banks and brokers.
- Standardized trading and payment systems for smoother operations.
- Advanced technology integration to streamline processes.
- Stronger checks and balances across trading, payment, and transfer systems.
- Access to relevant market information on a single platform.
Strengthening Investor Confidence
The SECP remains committed to collaborating with the MOF to further develop the Pakistan debt market. Increased transparency, accessibility, and competition will enhance investor confidence and market efficiency. These initiatives open new opportunities for both investors and the government, ultimately supporting the country’s economic growth.
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