Islamabad, March 23, 2024 – Pakistan’s Federal Minister for Finance and Revenue, Muhammad Aurangzeb, revealed intentions to explore Chinese investment avenues by considering the sale of Panda bonds worth up to $300 million, marking the country’s debut in the Chinese bond market.
In an interview with a foreign news agency, Minister Aurangzeb expressed eagerness to diversify Pakistan’s funding sources and tap into new investor markets. He emphasized the significance of selling Yuan-denominated debt, citing China’s position as the world’s second-largest and deepest bond market. Aurangzeb stressed that this move aligns with Pakistan’s strategy to expand its investor base, having previously issued dollar and eurobonds.
The initial Panda bond sale is expected to range between $250 million to $300 million, with potential for further issuances in the future, according to the finance minister. Aurangzeb reassured that Pakistan’s robust cash balances enable timely debt repayments, minimizing pressure on the currency. He expressed confidence in the stability of the Pakistani rupee, foreseeing it to remain relatively unchanged in the near term.
Aurangzeb identified volatile oil prices, particularly amid Red Sea attacks, as a potential wildcard factor impacting currency stability. Despite this, the Pakistani rupee has appreciated by 1.3% this year, emerging as one of Asia’s top-performing currencies, as per Bloomberg data.
A pressing challenge for Minister Aurangzeb involves negotiating new loans with the International Monetary Fund (IMF) to fortify Pakistan’s reserves post the expiration of the current bailout program in April. The IMF has indicated Pakistan’s interest in pursuing a new medium-term program to address fiscal and external vulnerabilities and support economic recovery.
Looking ahead, Aurangzeb stated Pakistan’s intention to seek a new IMF loan program lasting at least three years. Detailed discussions will occur following the IMF’s annual spring meetings.
Panda bonds, denominated in yuan, are sold in China by offshore entities, including governments, multilateral agencies, and corporations. The Panda bond market has attracted issuers worldwide, including countries like Egypt and Hungary, owing to its cost-effective borrowing terms. Bloomberg Intelligence forecasts a potential doubling of Panda bond issuance in 2024, compared to approximately 103.35 billion yuan ($14.3 billion) issued last year.
Pakistan’s foray into the Chinese bond market signifies a strategic move to enhance financial stability, broaden investor outreach, and harness emerging opportunities in global financial markets.
