Malaysia Makes History with Record-Breaking $1.5 Billion Global Sukuk Issuance

Malaysia has successfully issued a $1.5 billion global sukuk, shattering records with a 4.7 times oversubscription and a record-low spread. This monumental achievement is a testament to the country's robust economy and its commitment to fiscal and economic reform. The Ministry of Finance (MOF) announced that the issuance, which comprised a $850 million 5.75-year tranche and a $650 million 10-year tranche, was priced at a record-low spread, thanks to strong investor demand.

The asset-backed sukuk is structured under the Manafae concept, in accordance with the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) guidelines. This innovative approach has enabled the Malaysian government to tap into the global sukuk market, providing a unique investment opportunity for international investors. The sukuk is backed by service rights in Malaysia's urban public rail network, offering a secure and stable source of revenue for investors.

Finance Minister II Datuk Seri Amir Hamzah Azizan attributed the success of the issuance to the country's MADANI Economy framework, which has been in place since July 27, 2023. This framework has guided Malaysia's economic growth, ensuring sustainable development and long-term resilience. The minister emphasized that the strong oversubscription and record-low spread reflect continued international investor confidence in Malaysia's economic prospects and development policies.

The MOF noted that the fiscal deficit has narrowed to 3.7% of gross domestic product (GDP) in 2025, down from 6.4% in 2021. Additionally, government borrowings have declined to 9% of GDP from 13.6% over the same period. This improved fiscal position has been supported by economic growth of 5.2% in both 2024 and 2025, followed by 5.4% growth in the first quarter of 2026. The advance estimate of 5.8% for the second quarter points to stronger growth than initially projected.

Both tranches of the sukuk were assigned an A3 rating by Moody's Investors Service and an A- rating by S&P Global Ratings, in line with Malaysia's sovereign credit ratings and stable outlook. The 5.75-year tranche was priced at a profit rate of 4.612% per annum with a spread of 15 basis points (bps) over the comparable US Treasury, while the 10-year tranche was priced at a profit rate of 4.949% per annum with a spread of 25 bps.

The proceeds from the issuance will be used for the government's Shariah-compliant general purposes, including financing development expenditure and/or refinancing existing obligations. The MOF's investor engagement programme attracted participation from 140 international investors across various segments, including sovereign wealth funds, central banks and governments, asset managers, financial institutions, insurance companies, and pension funds.

By geography, the 5.75-year tranche was allocated to investors in Asia (76%), Europe, the Middle East and Africa (EMEA) (19%), and the United States (5%). The 10-year tranche was allocated to investors in Asia (63%), EMEA (18%), and the United States (19%). By investor type, the 5.75-year tranche was allocated to banks and financial institutions (43%), fund and asset managers (27%), and central banks and corporate and commercial banks (15%).