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Pakistan Plans Yuan-Denominated Bonds to Bolster Finances
Boosting Finances: Pakistan to launch $200m-$250m panda bonds in Chinese markets this year, Finance Minister Aurangzeb confirms.
ND
by News Desk
2025-01-13
Pakistan Plans Yuan-Denominated Bonds to Bolster Finances

Finance Minister Muhammad Aurangzeb announced on Monday that Pakistan is preparing to issue yuan-denominated bonds, commonly referred to as panda bonds, to strengthen its financial reserves.

Speaking to Bloomberg, Aurangzeb stated that the government plans to raise $200 million to $250 million from Chinese investors over the next six to nine months.

Panda bonds are debt securities issued by foreign entities in China’s capital markets, denominated in Chinese yuan (RMB). These bonds allow international corporations and sovereign governments to tap into the growing pool of Chinese investors.

Aurangzeb expressed regret that Pakistan had not previously leveraged this financing option, despite its immense potential.

“The country is very keen to tap panda bonds and Chinese capital markets,” the finance minister emphasized, adding, “We have been remiss as a country not to tap it previously.”

IMF’s Role in Economic Reforms

Aurangzeb also revealed that an International Monetary Fund (IMF) delegation is scheduled to visit Pakistan next month, with a focus on broadening the tax base. The IMF has set a target for Pakistan to achieve a tax-to-GDP ratio of 13.5% from the current 10%.

The IMF’s executive board approved a three-year, $7 billion aid package in September to stabilize Pakistan’s economy and pave the way for stronger, inclusive, and resilient growth.

“We are well on our way to achieving the tax target—not just because the IMF requires it, but because it is essential for fiscal sustainability,” Aurangzeb said.

Economic Indicators

Aurangzeb estimated that Pakistan’s gross domestic product (GDP) would expand by 3.5% in the fiscal year ending in June. The country, he explained, has entered a stabilisation phase but must now prioritize sustainable, export-led growth.

The State Bank of Pakistan (SBP) has played a role in bolstering economic stability by managing inflationary pressures and improving growth prospects. In December, the SBP lowered its key interest rate to 13%, signaling optimism in the economic outlook. The central bank is set to announce another potential rate cut on January 27.

Ratings and Reforms

Global rating agency Fitch upgraded Pakistan’s long-term foreign-currency issuer default rating to CCC+ from CCC in July, attributing the improvement to the IMF deal. Standard and Poor (S&P) has maintained Pakistan’s rating at CCC+.

Over the past five decades, Pakistan has undergone 25 IMF loan programs. The IMF continues to stress the importance of reforms in critical areas such as tax collection, energy sector efficiency, and state-owned enterprise management to break the cycle of financial crises.

Outlook for Panda Bonds

In March last year, Aurangzeb announced Pakistan’s intention to raise up to $300 million via panda bonds. This initiative marks a significant step toward diversifying financial resources and tapping non-traditional markets to ensure economic resilience.

The government remains optimistic about its ability to attract Chinese investors and sees the panda bonds as a crucial element of its strategy to stabilize and grow the economy.

 
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PakistanEconomy

FinanceReforms

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