Pakistan will issue yuan-denominated panda bonds as early as June to further integrate its capital markets with China’s, a move that will help Beijing in its drive to expand the currency’s use, the South’s finance minister said -Asian country.
In an exclusive interview with the Post on Sunday, Muhammad Aurangzeb also pledged greater cooperation with Beijing on the next phase of the China-Pakistan Economic Corridor (CPEC) – a key initiative to boost bilateral trade and investment.
He also called for greater participation of China’s private sector and export-led industries to transform Pakistan’s debt-laden economy.
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Aurangzeb said Pakistan planned to raise $200 million to $250 million from Chinese investors, adding that it was “absolutely crucial” for the country to diversify its financing base.
The minister is in Hong Kong for the two-day Asian Financial Forum, which started on Monday.
‘Since I took over [in March 2024]I have been very clear about this: that we want to go for panda bonds, an inaugural sovereign panda bond… I urge everyone, including our own teams, to see if we can get this done before June get,” Aurangzeb said. said.
Panda bonds – usually denominated in yuan and issued in China by non-Chinese organizations – have gained popularity as traders and countries seek to diversify from an over-reliance on the US dollar, while providing attractive rates to the world’s second-largest economy. want to tap into the world.
The minister added that Pakistan had followed Egypt’s example by issuing the yuan bonds thanks to credit enhancement from the Beijing-led Asian Infrastructure Investment Bank (AIIB).
Last year, Egypt received guarantees from the AIIB and the African Development Bank, covering principal and interest, to issue panda bonds in the local market of mainland China.
“I met the president of the AIIB in Washington… with the very clear vision that we will replicate what Egypt did in terms of credit enhancement… allowing us to access the local capital markets for the panda bonds,” said he.
Aurangzeb added that Pakistan would help support the “internationalization of the renminbi” and boost cooperation with the “world’s second largest and second deepest capital market.”
Despite its low credit rating, Pakistan is reportedly aiming to issue Eurobonds in the financial year 2026. But Aurangzeb has said his government will try to achieve a ‘single-B’ category from at least one major rating agency.
Pakistan has struggled with inflation for years and was pushed to the brink of bankruptcy in 2023 as its economy languished amid political chaos and economic mismanagement.
But the country’s economy rebounded last year as inflation fell from nearly 38 percent in May 2023 to 4.1 percent last month.
The International Monetary Fund and Pakistan also reached an agreement on an extended 37-month bailout loan of about $7 billion, with some of the country’s biggest debt holders, including China, agreeing to a one-year debt renewal last year.
Amid what he called the “balance of payments problem”, Aurangzeb said strengthening CPEC 2.0 cooperation would be crucial, adding that the latest version of a flagship project, the Belt and Road Initiative, would help the country to process its debts through an export-oriented model.
The CPEC is a key project under Beijing’s Belt and Road Initiative, which has committed more than $65 billion for development in Pakistan, including roads and railways.
The second phase of the project, according to Pakistan, aims to set up special economic zones in partnership with China to transform the country’s agriculture and information technology sectors while attracting Chinese companies to relocate their low-cost industries to the country.
During their meeting last June, Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif emphasized the upgrade of the CPEC project.
Aurangzeb said Pakistan was in trouble because its economy was “mainly import-driven”, leaving the country “without foreign exchange and into a balance of payments problem”.
Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif met in Beijing last June. Photo: Reuters. alt=Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif met in Beijing last June. Photo: Reuters.>
“That means fundamentally changing the DNA of the economy towards export-led growth,” he added.
“CPEC phase two is very much about business-to-business, especially the economic zones. We want to ensure that some companies from the mainland come in and use it as a real export hub.”
“CPEC phase one was all about infrastructure, and that’s where the bulk of this debt came in… [If] we are entering phase two where we are going into the export industries… we can create enough dollars and… pay back this debt,” he added.
Aurangzeb also vowed to boost security in his country to protect Chinese companies amid a series of deadly attacks in the region, some of which targeted Chinese interests and personnel.
