Panda Bonds: A Step Towards Pakistan-China Capital Market Growth
HONG KONG: As part of efforts to stabilize the economy after a challenging period, Pakistan plans to launch yuan-denominated Panda Bonds in 2024. Finance Minister Muhammad Aurangzeb revealed the development during an interview with Bloomberg Television at the Asian Financial Forum in Hong Kong.
The country is looking to raise $200 million to $250 million from Chinese investors over the next six to nine months. This is a slight reduction from the previously targeted $300 million, with China International Capital Corporation advising Islamabad on the issuance.
Aurangzeb emphasized the urgency to integrate into Chinese capital markets, highlighting the untapped potential of Panda Bonds for economic transformation. The minister also underscored the government’s commitment to reshaping the economy into an export-led model.
Recent improvements in economic indicators support these ambitions. Foreign exchange reserves reached a three-year high of $18.7 billion in November 2024, while remittances climbed to $3.1 billion in December, marking a 29.3% year-on-year increase. The GDP growth forecast for FY 2024-25 has also been revised upward to 3% from 2.8% projected earlier by the Asian Development Bank.
Policy changes have bolstered these achievements, including the State Bank of Pakistan’s decision to cut the policy rate by 200 basis points to 13%. Further reductions are anticipated, signaling a shift toward sustainable economic growth.
Aurangzeb noted that achieving a tax-to-GDP ratio of 13.5% is critical, not just to meet IMF conditions but to ensure fiscal sustainability. The government’s ongoing initiatives aim to broaden the tax base, stabilize the economy, and pave the way for long-term progress.