ISLAMABAD: Pakistan’s new finance minister said he’s keen to tap Chinese investors by selling as much as $300 million in Panda bonds for the first time ever this year.Selling yuan-denominated debt will allow Pakistan to diversify its funding sources and reach investors in a new market, Muhammad Aurangzeb, said in an interview Friday at his office in Islamabad.
The finance minister said the government’s cash balances are strong enough that it’s able to pay its debts on time. The payments are unlikely to put pressure on the currency, and he expects the rupee to remain stable, he said.
To bolster its foreign exchange reserves, Pakistan is seeking to issue up to $300 million in Panda Bonds, targeting Chinese investors for the first time, according to Finance Minister Muhammad Aurangzeb.
The initiative was reported by Bloomberg, highlighting Pakistan’s strategy to diversify its funding sources by tapping into the Chinese bond market, considered the second-largest globally.
Aurangzeb emphasized the significance of accessing China’s bond market, noting that Pakistan has previously issued dollar and Eurobonds.
The move to issue yuan-denominated debt aims to engage with a new investor base, enhancing the country’s financial resilience.
It’s 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 it is the “right thing to do for the country” to tap the market, given Pakistan has already sold dollar and eurobonds, he said.
Shehbaz to Visit China Soon – Pakistan Keen to Move to Next Phase of CPEC
The initial issuance is projected to range between $250 million to $300 million, with plans for subsequent offerings in the future.
Panda bonds, which are yuan-denominated securities sold in China by foreign entities, offer Pakistan an opportunity to strengthen its financial position amid challenges such as high inflation, rising interest rates, and declining foreign exchange reserves.These factors have collectively hampered the country’s economic growth prospects.
The decision follows directions from Prime Minister Shehbaz Sharif to the Ministry of Finance to explore the potential of Panda Bonds as a means to improve liquidity.
He takes office at a time when economic pessimism in the country is at a record high and the government is trying to avoid defaulting on its debt. 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.
Despite current economic pressures, Aurangzeb remains optimistic about Pakistan’s capacity to fulfill its debt obligations without adversely affecting the national currency. He anticipates the rupee will maintain stability, though he acknowledges the unpredictability of oil prices as a potential risk factor.
The finance minister said the government’s cash balances are strong enough that it’s able to pay its debts on time. The payments are unlikely to put pressure on the currency, and he expects the rupee to remain stable, he said.
“I don’t really see a huge pressure on the rupee at this point in time,” he said. “As we go forward, I think it’s going to remain range bound around these levels.” The “wildcard” is oil prices, he added, which remain uncertain given the Red Sea attacks.
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.
Pakistan remains heavily reliant on IMF support, and has received 23 bailout packages from the Washington-based lender since gaining its independence in 1947, among the most of any country in the world.
Aurrangzeb said Pakistan will 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.
IMF said earlier this week that Pakistan has expressed interest in a new medium-term program to improve its fiscal and external weaknesses and strengthen its economic recovery.
Analysts expect the IMF program to be much tougher than recent loan deals. The minister will have to raise electricity and gas prices that may stoke public anger and find ways to increase revenue from undertaxed sectors such as retail and real estate, which have successfully blocked such moves in the past.
Finance with Force to Save Pakistan -Power of Interior Should be Used against the Defaulters not PTI – by Tazeen Akhtar
