KARACHI: In a major shift in the approach to financing city infrastructure if approved by the Pakistan Stock Exchange (PSX) City Mayor Barrister Murtaza Wahab on Thursday gave a nod for the launch of `municipal bonds` to raise funds to finance public projects and urban development schemes.

The Karachi Metropolitan Corporation (KMC) in a statement said: `The bold step is a leap t owards financial innovation, sustainability, and self-reliance under the dynamic leadership of Mayor Wahab`.

The approval for the municipal bonds follows the mayor`s recent visit to thePSX, where he had expressed his commitment to `modernising Karachi`s infrastructure through innovative financial instruments and public-private participation,` the statement added.

`This landmark initiative marks a significant transformation in how cities like Karachi can fund their infrastructure and development needs. By moving away from conventional reliance on limited fiscal allocations, the KMC is embracing capital market tools that are widely used in developed economies to fund city projects in a transparent and sustainable manner.

The statement said that municipal bonds are `structured debt instruments` issued by local governments to finance specific development projects.

`These instruments allow structured repayment through dedicated revenue streams, reducing dependence on external subsidies,` it added.

`The initial bond issuance will finance the development of a commercial marketon KMC-owned land, a project designed to generate a steady stream of rental income. This income will be earmarked exclusively for the servicing and repayment of the bond. The underlying land will serve as collateral, fully aligning with asset-backed financing regulations and ensuring investor confidence,` said the statement.

`Once the bond is repaid, the KMC will retain full ownership of the commercial asset, ensuring long-term revenue inflows that will strengthen the corporation`s financial independence,` it said.

`The municipal bonds will be floated through the PSX via a competitive bidding process, ensuring maximum transparency, investor confidence, and market participation. The bond structure will remain fully Shariah-compliant, with oversight from a dedicated Shariah advisory board to cater to ethicalinvestment guidelines.

In accordance with procedural requirements, the KMC statement said,the bond issuance proposal has been legally vetted to confirm its compliance with the Sindh Local Government Act 2013, along with all applicable bylaws and financial regulations.

The finalised proposal had been submitted and formally approved by the mayor of Karachi.

`Following the mayor`s approval, the KMC will publish an Expression of Interest (EOI) to invite bids and formalise the bond execution process. This will be carried out with full transparency and in accordance with procurement rules, ensuring the best possible outcomes for citizens of Karachi,` said the statement.

`This pioneering initiative represents a bold and forward-looking governance model aimed at reshaping Karachi`s financial landscape and accelerating urban development. By unlocking the power of municipal finance, the KMC is setting a precedent for other cities across Pakistan to follow,` it added.