Pakistan, facing a severe economic crisis characterized by high inflation and declining foreign exchange reserves, is seeking cooperation from Chinese institutional investors to issue Panda Bonds. The country aims to raise between $250 million and $300 million initially through this initiative.
Federal Minister for Finance and Revenue Muhammad Aurangzeb discussed the plan with Pan Gongsheng, Governor of the People’s Bank of China (PBoC), during a meeting in Beijing on Friday. The meeting covered a wide range of economic issues.
Panda Bonds are renminbi-denominated bonds issued in China by foreign entities, targeting Chinese investors. They offer foreign countries and companies a platform to raise capital within China’s domestic market. Unlike Dim Sum Bonds, also denominated in renminbi but issued in Hong Kong for foreign investors, Panda Bonds are specifically sold in China and subject to domestic regulations.
By issuing Panda Bonds, Pakistan aims to diversify its funding sources and strengthen its foreign exchange reserves through Chinese investment.
Muhammad Aurangzeb, a former JPMorgan Chase & Co. banker, was appointed finance minister by Prime Minister Shehbaz Sharif in March after a contentious election. He assumes office at a time of record economic pessimism in Pakistan, grappling with the highest inflation rate in Asia, exceeding 20%. The country also faces $24 billion in external debt payments in the fiscal year beginning July, a sum three times its foreign-exchange reserves.
Earlier this year in March, addressing the Special Investment and Facilitation Council’s (SIFC) apex committee, Aurangzeb highlighted the need for a medium-term program spanning two to three years. He emphasized the importance of undertaking deep-rooted structural reforms during this period.
