Finance Minister Muhammad Aurangzeb briefed China’s central bank governor on Pakistan’s Panda bond issuance plans at a meeting in Beijing. Image/X/@Financegovpk
Pakistan has enlisted Chinese institutional investors to help it issue panda bonds to raise an initial $250 million to $300 million, aiming to improve the fiscal stability of the cash-strapped country, which faces several challenges including high inflation and dwindling foreign exchange reserves.
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Federal Minister for Finance and Revenue Mohammed Aurangzeb discussed the plan in Beijing on Friday when he held talks on a wide range of economic issues with Pan Gongsheng, Governor of the People’s Bank of China (PBoC).
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What is Panda Bond?
Panda bonds are a type of bond issued by foreign entities in China, denominated in RMB and targeted to Chinese investors. Panda bonds serve as a platform for foreign countries and foreign companies to raise capital in the Chinese domestic market. Dim Sum bonds are also denominated in RMB but issued in Hong Kong to foreign investors, whereas Panda bonds are sold only in China and are subject to domestic regulations.
Pakistan is entering this market by issuing Panda bonds with the aim of diversifying its funding sources and boosting its foreign exchange reserves through Chinese investment.
Muhammad Aurangzeb, a former JPMorgan Chase banker, was appointed finance minister by Prime Minister Shehbaz Sharif in March after contentious elections.
Aurangzeb’s appointment comes at a time of record economic pessimism in Pakistan, which is struggling with Asia’s highest inflation rate at over 20 percent and faces a foreign debt repayment of $24 billion in the fiscal year that starts in July, three times its foreign exchange reserves.
Aurangzeb, 59, a former JPMorgan Chase banker, was picked as finance minister by Prime Minister Shehbaz Sharif in March after fierce elections.
When he took office, economic pessimism in Pakistan was at an all-time high and the government was trying to avoid defaulting on its debt. Pakistan’s inflation rate is over 20 percent, the highest in Asia, and it faces a foreign debt repayment of $24 billion in the fiscal year that starts in July, three times its foreign exchange reserves.
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Earlier this March, President Aurangzeb, addressing the apex committee of the Special Investment Promotion Council (SIFC), said the government needed to work towards a medium-term plan spanning two to three years. “And during that period, the government will have to undertake deep-rooted structural reforms,” he added.
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