Pakistan to return to capital markets starting with Panda bond

Pakistan to return to capital markets starting with Panda bond

Pakistan is set to return to the capital markets with a significant move, issuing $1 billion in Panda bonds over the next three fiscal years. This initiative, announced by the Finance Ministry, marks a strategic shift in Pakistan's external financing strategy, aimed at reducing reliance on short-term domestic debt and tapping into China's vast capital markets [1].

The Panda bonds, denominated in Chinese yuan, will be issued in three phases. The first tranche of $250 million is expected to be issued in the current fiscal year, followed by two more tranches of $750 million each in subsequent years. This move is part of Pakistan's broader plan to diversify its borrowing instruments and shift away from expensive short-term T-bills and floating-rate loans [1].

The announcement coincides with Chinese Foreign Minister Wang Yi's ongoing visit to Pakistan, where discussions on financial cooperation, the China-Pakistan Economic Corridor (CPEC) Phase-II, and security matters are taking place. Further developments on the Panda Bonds are expected during Prime Minister Shehbaz Sharif's upcoming trip to Beijing, where Pakistan's Finance Minister will hold high-level meetings with Chinese counterparts [1].

The Panda Bonds initiative is not just a financial tool but also a symbol of Pakistan's deepening economic partnership with China. The move is expected to bolster Pakistan's GDP growth, projected to expand from Rs114,000 billion to Rs163,000 billion by 2028, supported by external financing flows, reforms under CPEC, and bilateral initiatives like the Panda Bonds [1].

Panda Bonds are yuan-denominated bonds issued in China by foreign governments or corporations. They provide countries like Pakistan an opportunity to access Chinese investors, raise funds in local currency, and diversify their debt portfolio. For China, such instruments enhance the global use of the Chinese yuan and strengthen financial integration with partner countries [1].

The renewed plan for Panda Bonds signals stronger trust and coordination between Islamabad and Beijing. While Pakistan had previously explored Panda Bonds in 2019, market conditions at the time led to a delay in issuance. The current move reflects Islamabad's strategic pivot toward Chinese capital markets, aiming to reinforce financial stability, boost investor confidence, and mark a new chapter in Pakistan-China economic cooperation [1].

References:
[1] https://thedailycpec.com/pakistan-china-set-to-issue-1bn-panda-bonds/