ISLAMABAD: Pakistan’s new finance minister said this week the South Asian nation was keen to tap Chinese investors by selling as much as $300 million in Panda bonds for the first time ever this year.
Panda bonds are yuan-denominated instruments sold in China by offshore issuers, including companies, multilateral agencies and governments. The market has drawn issuers including Egypt and Hungary, thanks to its lower cost of borrowing. Growth in Panda bond issuance could easily double in 2024, from about 103.35 billion yuan ($14.3 billion) last year, according to Bloomberg Intelligence.
Selling yuan-denominated debt will allow Pakistan to diversify its funding sources and reach investors in a new market, Finance Minister Muhammad Aurangzeb said in an interview to Bloomberg at his office in Islamabad on Friday.
Selling the bonds was something “we should have looked at quite frankly some time back,” he said.
China has the “second-largest and deepest bond market in the world” and tapping that capital is the “right thing to do for the country” given Pakistan has already sold dollar and eurobonds, he said.
Aurangzeb said the initial Panda bond sale would be about $250 million to $300 million, which would be followed by further issuances.
A former banker from JPMorgan Chase & Co., Aurangzeb, 59, was picked as finance minister by Prime Minister Shehbaz Sharif earlier this month after a contentious election. He was last the president and CEO of HBL, Pakistan's largest bank.
Aurangzeb takes office amid record levels of economic pessimism in the country as the government is trying to avoid defaulting on its debt. Meanwhile, Pakistan has been seeking to balance the competition between Washington and Beijing.
Pakistan has been a flagship destination for Chinese President Xi Jinping’s Belt and Road Initiative, and Beijing has provided billions in loans that have kept the nation afloat.
“China has helped us in a big way,” said Aurangzeb, adding that the US supported Pakistan with its International Monetary Fund program and “will always remain very critical.”
Pakistan has the highest inflation rate in Asia of more than 20% and faces $24 billion of external debt payments in the fiscal year starting July, three times its foreign-exchange reserves.
But after months in freefall, Pakistan’s rupee is up 1.3% this year, according to local pricing compiled by Bloomberg, among the best-performing currencies in Asia.
Aurangzeb’s most pressing challenge is negotiating new loans with the International Monetary Fund to help bolster the country’s reserves right after the current bailout program ends in April.
He told Bloomberg Pakistan would seek a new loan program from the IMF of at least three years. Further details will be discussed after the Washington-based lender’s annual spring meetings, he said.
Pakistan to tap China for $300 million debut Panda bonds — Bloomberg
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Pakistan to tap China for $300 million debut Panda bonds — Bloomberg
- Finance minister says initial Panda bond sale would be about $250-$300 million followed by further issuances
- Selling yuan-denominated debt will allow Pakistan to diversify its funding sources, reach investors in a new market