Pakistan is set to issue its first yuan-denominated bonds, known as Panda bonds, this year, aiming to raise $200 million to $250 million from Chinese investors. Finance Minister Muhammad Aurangzeb shared the news in an interview with Bloomberg on Monday, expressing optimism about meeting the conditions of Pakistan’s ongoing International Monetary Fund (IMF) bailout program.
The move comes as Pakistan’s sovereign credit rating has seen upgrades from all three major credit agencies. Aurangzeb hopes for further upgrades, aiming to enter the “single-B” category, which would allow Pakistan to re-enter global bond markets for fundraising.
“We are very keen to tap Panda bonds and Chinese capital markets,” Aurangzeb said at the Asian Financial Forum in Hong Kong. “We have been remiss as a country not to tap it previously.”
A Shift Toward Sustainable Economic Growth
Aurangzeb’s new target of $200 million to $250 million is slightly lower than the $300 million goal he set earlier in 2024. Pakistan has enlisted China International Capital Corporation to advise on the issuance of these bonds.
The announcement comes at a time when Pakistan is experiencing more stability compared to two years ago, when an IMF bailout deal was uncertain, and inflation and interest rates were above 20%. The government remains optimistic about fulfilling the terms of a $7 billion IMF loan, which includes raising the country’s tax-to-GDP ratio from 10% to 13.5% by December.
“We are well on our way to achieve that target,” Aurangzeb stated. “Not only because the IMF is saying that, but because from my perspective the country needs to get into that benchmark to make our fiscal situation sustainable.”
Positive Signs Amid Economic Challenges
After securing the IMF bailout in 2024, Pakistan has seen some positive economic developments, including a reduction in inflation, which has given policymakers room to cut borrowing costs. Strong remittances have helped stabilize the country’s currency reserves, with the rupee rising by 2% in 2024, making it one of the best performers among emerging markets. Additionally, the country’s stock market outperformed most others last year.
However, Pakistan’s financial situation remains challenging. The government needs to increase taxes to secure a fresh $1 billion loan tranche from the IMF. Failure to meet the IMF’s tax revenue targets could jeopardize the bailout agreement.
Focus on Structural Reforms and Sustainable Growth
Pakistan has participated in 25 IMF loan programs over the past 50 years, and Aurangzeb emphasized the need for lasting reforms in key areas like energy, tax collection, and state-owned enterprises to break the cycle of indebtedness.
Regarding economic growth, Aurangzeb expects Pakistan’s GDP to expand by 3.5% in the fiscal year ending in June, slightly lower than the targeted 3.6% growth. The State Bank of Pakistan, which has reduced interest rates to their lowest point in more than two years, is set to announce its next policy decision on January 27. Inflation is expected to stabilize within a target range of 5%–7% over the next year.
“We are entering a phase of stabilization,” Aurangzeb said. “Now, we need to focus on sustainable growth. Our goal is to fundamentally change the economy’s DNA and make it export-led.”
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