Pakistan plans to issue its first Panda Bond in China’s bond market by the end of 2025. This will be the first time Pakistan issues a government bond specifically for Chinese investors.
The government expects the money raised from the bond to increase Pakistan’s foreign currency reserves over the next three to five years. According to policymakers, this step will reduce dependence on the US dollar, tap China’s financial market, and support trade in yuan under the China-Pakistan Economic Corridor (CPEC).
Pakistan’s bond will be arranged by Habib Bank Limited (HBL) and China International Capital Corporation (CICC). Initially, it will target banks, insurance companies, and pension funds in China. Later, retail investors may also be added.
How do Panda Bonds Work?
Panda Bonds are bonds in are in Chinese yuan (RMB). They are issued by non-Chinese entities in China and can only be sold inside China. They are listed on the Chinese Interbank Bond Market (CIBM) and often guaranteed by the Asian Development Bank (ADB) or Asian Infrastructure Investment Bank (AIIB).
The bond must first get approval from Chinese regulators, including the People’s Bank of China. Chinese investors will check Pakistan’s debt management, fiscal discipline, and economic reforms before investing.
Panda Bond to Boost Funds, but Risks Remain
Finance Minister Muhammad Aurangzeb said Pakistan has returned to commercial markets and got funding from Middle Eastern banks. The Panda Bond will give long-term funds and bring in new investors. With these bonds, Pakistan will get more funding options. But there are risks like changes in the yuan’s exchange rate.
The Panda Bond shows Pakistan’s growing financial connection with China and other Global South countries. It also opens new ways for Pakistan to raise funds in yuan. However, risks remain, such as the yuan’s exchange rate changes.
The bond can help improve the cash flow and improve investor confidence. However, it is not the only way to fix Pakistan’s economic issues. It can show results only if the government continues reforms and uses the funds responsibly.
