Panda bond likely this year: Aurangzeb

Published January 14, 2025 Updated 2 days ago

 HONG KONG: Finance Minister Muhammad Aurangzeb speaks at the Asian Financial Forum on Monday. He emphasised the transformative role of innovation in driving economic growth.—APP
HONG KONG: Finance Minister Muhammad Aurangzeb speaks at the Asian Financial Forum on Monday. He emphasised the transformative role of innovation in driving economic growth.—APP

KARACHI: Finance Minister Muh­ammad Aur­a­n­gzeb has said that the country is preparing to laun­ch yuan-denominated Panda bonds this year to shore up its finances, Dawn.com reported on Monday.

The country is planning to raise $200 million to $250m from Chinese investors over the next six to nine months, the finance minister told Bloomberg in an interview.

Panda bonds are a type of debt security issued by foreign entities in the Chin­ese capital markets, and they are denominated in Chinese yuan (RMB).

In March last year, the finance minister annou­nced that Pakistan was keen to tap Chinese investors by selling as much as $300m in Panda bonds.

Says Pakistan to achieve 13.5pc tax ratio in FY25

These bonds allow foreign issuers, including multinational corporations, international financial institutions, and sovereign governments, to access capital from Chinese investors.

“The country is very keen to tap the panda bonds and the Chinese capital markets,” Mr Auran­gzeb said according to the report. “We have been remiss as a country not to tap it previously.”

Speaking on the sideli­nes of the Asian Financial Forum in Hong Kong, the minister also confirmed that the International Mon­e­tary Fund (IMF) mission is scheduled to visit Paki­stan next month, adding that it wanted the country to broaden its tax base and reach a tax-to-GDP ratio of 13.5 per cent, from 10pc in December.

“We are well on our way to achieving that target, not only because the IMF is saying that but because, from my perspective, the country needs to get into that benchmark to make our fiscal situation sustainable,” he said.

The IMF’s executive board approved a 37-month $7bn Extended Fund Faci­lity in September to enable the country to “cement macroeconomic stability and create conditions for stronger, more inclusive and resilient growth”.

In July, global rating agency Fitch also upgraded Pakistan’s long-term foreign-currency issuer default rating (IDR) to CCC+ from CCC on the back of the country’s deal, while Standard and Poor’s (S&P) maintained its rating of CCC+.

According to the report, Pakistan has undergone 25 loan programmes over half a century, with the IMF insisting the country institute “durable reforms in key areas of the energy sector, tax collection and state-owned enterprises to end a cycle of indebtedness”.

Aurangzeb also told Bloomberg that the country’s gross domestic product (GDP) “will probably expand 3.5pc in the fiscal year ending June”.

“We are into that phase of stabilisation,” Auran­gzeb stated. “Now, where do we go from here? We have to focus on sustainable growth. We are now very focused on fundamentally changing the DNA of the economy to make it export-led.”

The State Bank of Paki­stan (SBP), which lowered its key interest rate to 13pc in December, cited that growth prospects had somewhat imp­r­o­ved, and it had mana­ged to keep inflationary and external account pre­ss­ures in check.

Published in Dawn, January 14th, 2025

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