Pakistani Finance Minister expresses strong interest to engage Chinese investors
Staff Writer
Islamabad: Pakistani Federal Minister for Finance and Revenue, Muhammad Aurangzeb this week expressed his strong interest in engaging Chinese investors through the groundbreaking initiative of issuing Panda bonds, aiming to raise up to US $ 300 million for the first time this year.
In a statement, Minister Aurangzeb highlighted the significance of venturing into the sale of Yuan-denominated debt, emphasizing its potential to broaden Pakistan’s funding avenues and attract investors from a previously untapped market segment.
Acknowledging that this move should have been considered earlier, the minister emphasized the allure of China’s position as home to the “second-largest and deepest bond market in the world.”
He asserted that tapping into this market aligns with Pakistan’s interests, particularly considering the successful sales of Dollar and eurobonds in the past.
Detailing the initial plans, Aurangzeb outlined the expected amount of the first Panda bond sale, estimated to range between US $ 250 million to US $ 300 million, with intentions to follow up with additional issuances.
Assuring the financial stability of the government, the finance minister affirmed that Pakistan’s cash reserves are robust enough to meet debt obligations promptly, thereby alleviating concerns about any adverse impact on the currency.
He expressed confidence in the stability of the rupee, stating, “I don’t really see a huge pressure on the rupee at this point in time,” anticipating it to remain relatively steady in the near future.
However, Aurangzeb pointed out the potential volatility introduced by oil prices, particularly in light of recent Red Sea attacks, identifying it as a significant variable in the economic landscape.
Remarkably, Pakistan’s rupee has shown resilience, marking a 1.3% increase this year, placing it among the top-performing currencies in Asia.
Looking ahead, the minister faces the challenge of negotiating new loan terms with the International Monetary Fund (IMF) as Pakistan seeks to bolster its reserves post the current bailout program ending in April.
Quoting the International Monetary Fund (IMF), which expressed Pakistan’s interest in a new medium-term program to address fiscal and external vulnerabilities while bolstering economic recovery, Aurangzeb affirmed plans to pursue a loan program spanning at least three years. Further details are expected to unfold after the IMF’s annual spring meetings.
Panda bonds, characterized by their denomination in Yuan and issued in China by offshore entities such as companies, multilateral agencies, and governments, have gained traction for their cost-effective borrowing opportunities.
The Panda bond market has seen significant growth potential, with Bloomberg Intelligence estimating a potential doubling in issuance for 2024, up from approximately 103.35 billion Yuan (US $ 14.3 billion) last year.
Minister Aurangzeb plans to tap into the Chinese market through Panda bonds reflect Pakistan’s strategic move to diversify its funding sources, strengthen its financial position, and capitalize on emerging opportunities in the global financial landscape.
