Islamabad March 22 2024: 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.
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.
Aurangzeb said the initial Panda bond sale would be about $250 million to $300 million, which would be followed by further issuances. A former banker from JPMorgan Chase A Co., Aurangzeb, 59, was picked as finance minister by Prime Minister Shehbaz Sharif in March after a contentious election.
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.
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.
Aurrangzeb also said he expects economic growth to be higher in the fiscal year beginning in July. Pakistan will seek a new loan program from the International Monetary Fund of at least three years, he said. Panda bonds are yuan-denominated instruments sold in China by offshore issuers, including companies, multilateral agencies and governments.
The market has drawn issuers including Egypt and Hungary, thanks to its lower cost of borrowing. Growth in Panda bond issuance could easily double in 2024, from about 103.35 billion yuan ($14.3 billion) last year, according to Bloomberg Intelligence.
