According to excerpts of his speech seen by Reuters, Balls will say: “The measures this government has taken make it possible for issuers to seriously consider the merits of issuing Islamic finance instruments.
“I believe there are great potential advantages for the UK government issuing sharia-compliant government debt.
“The feasibility study will also be assessing the opportunity for issuing such instruments, taking into account the government’s debt management objectives.”
The announcement follows measures introduced in this year’s budget enabling Islamic bonds, or sukuk, to be issued, held and traded in the same way as corporate bonds.
The government-backed national savings and investments agency has also been asked to look into making such products available to the public.
The results of the study will be published in autumn.