WEB DESK: Finance Minister Muhammad Aurangzeb has announced that Pakistan is set to issue its inaugural Panda Bond in June. The move is expected to raise about $200 million from the Chinese certainly a significant step in boosting Pakistan’s presence in capital markets in China.
In an exclusive interview with a Hong Kong news channel, he stated “This step is part of a broader strategy to transition Pakistan’s economy towards export-driven growth, with a focus on achieving sustainability in the country’s balance of payments.”
Panda Bonds refer to the renminbi-denominated bonds issued by foreign entities in the capital markets of China. The said financial instruments allow foreign governments, multinational corporations, and financial institutions to raise capital directly from Chinese investors.
Launched in 2005, Panda Bonds came to be an effective catalyst for cross-border investment which consequently generates common economic benefits for issuing countries as well as Chinese stakeholders.
Panda Bonds provide access to China’s vast and liquid capital markets, enabling them to diversify their investor base and reduce reliance on traditional debt markets. This diversification is particularly beneficial for countries like Pakistan, as it provides an opportunity to stabilize foreign exchange reserves and attract long-term investments. For China’s economy, these bonds facilitate deeper financial integration with global markets, enhance the internationalisation of the renminbi (RMB), and create opportunities for Chinese investors to diversify their portfolios by investing in international assets.
This Part of the proposal has been following the commitment that the government had about the IMF setting targets under the program Extended Fund Facility of $ 7 billion which was approved last year. Expanding the tax net and improving new sources of income were led to formulate this agenda under Prime Minister Shehbaz Sharif.
Focus on the second phase of CPEC
The finance minister also emphasized the importance of CPEC in investment and economic cooperation. He added “The second phase of CPEC is going to be a magnet for Chinese companies and would be opening more doors for investments.” He invited Hong Kong businessmen and the government to visit Pakistan to develop business and financial links, saying that Hong Kong could act as a strategic hub for joint ventures between Chinese and Pakistani enterprises.
Tapping For Capital Markets
Previously in an interview with Bloomberg Television at the Asian Financial Forum in Hong Kong, Aurangzeb reiterated that Pakistan was eager to make strides in capital markets in China, admitting the country had been slow in exploring this opportunity in the past. The government, he revealed, will raise about $200 million to $250 million in the next six to nine months, as advised by China International Capital Corporation. This target is slightly below the previously considered value of $300 million.
Better economic indicators
It has been possible for some months that Pakistan would witness some promising developments in its economy. Foreign exchange reserves have reached a tri-year high of $18.7 billion within November of 2024 for remittances, which surged to $3.1 billion in December, reflecting an annual growth of 29.3 per cent. Additionally, the Asian Development Bank (ADB) revised Pakistan’s growth forecast for the fiscal year 2024-25.
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