Pakistan eyes $300m panda bond debut
ISLAMABAD: The country is keen to tap Chinese investors by selling as much as $300 million in panda bonds for the first time ever this year, Finance Minister Muhammad Aurangzeb said on Friday.
Panda bonds are bonds denominated in Chinese yuan but issued by foreign borrowers, including companies, multilateral agencies and governments.
In an interview with Bloomberg, the minister said that selling yuan-denominated debt would allow Pakistan to diversify its funding sources and reach investors in a new market.
It’s something “we should have looked at quite frankly some time back”, he was quoted as saying by the Associated Press of Pakistan.
Government to discuss Extended Fund Facility with IMF next month
China has the second-largest and deepest bond market in the world and “it is the right thing to do” for Pakistan to tap that market, given Pakistan has already sold dollar and eurobonds, Mr Aurangzeb said, according to the report.
He said initial panda bond sale would be about $250m to $300m, which would be followed by further issuances.
The minister said that the government’s cash balances were strong enough, and it was able to pay its debts on time. The payments were 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. As we go forward, I think it’s going to remain range-bound around these levels,” he told Bloomberg, according to an APP report.
The “wildcard” is oil prices, he added, which remain uncertain given the Red Sea attacks.
He noted that the most pressing challenge was negotiating new loans with the International Monetary Fund (IMF) to help increase foreign exchange reserves right after the current short-term bailout programme ends next month.
Extended Fund Facility
On Friday, the finance minister also confirmed that Pakistan would discuss an Extended Fund Facility (EFF) with the IMF in Washington next month as the country looks to alleviate a full-scale economic crisis.
The ongoing $3 billion arrangement with the global lender expires on April 11, and the two sides reached a staff-level agreement regarding the disbursal of the final tranche of $1.1bn earlier this week.
“We have expressed our strong interests in an Extended Fund Facility with the IMF, but the quantum is not clear yet,” Mr Aurangzeb said, adding that the lender was “very receptive” to the request, according to a Reuters report.
He said the US has also been “very supportive” in the matter.
Prime Minister Shehbaz Sharif has directed his finance team to begin work on seeking an extended fund facility from the IMF. On Thursday, he termed a long-term bailout from the IMF “inevitable”.
The IMF had also said it would support formulating a new economic programme for the country if it asks for one.
The global lender’s rescue package last summer had helped Pakistan avert a sovereign default but, to secure it, the country had to revise its budget, and raise interest rates, taxes, and electricity and gas prices.
As a result, during the period, Pakistan struggled through inflation as high as 38pc, historic depreciation of the rupee, and contraction of the economy.
Published in Dawn, March 23rd, 2024