Pakistan Makes Progress on First Panda Bonds, Finance Chief Says

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Pakistan is preparing to debut yuan-denominated bonds this year to shore up finances, its Finance Minister said, while the government remains optimistic of meeting the International Monetary Fund’s bailout loan terms.

The South Asian nation is planning to raise $200 million to $250 million from Chinese investors over the next six to nine months, Finance Minister Muhammad Aurangzeb told Bloomberg’s David Ingles and Rebecca Choong Wilkins in a television interview Monday.

The plan comes as Pakistan’s sovereign rating has been upgraded recently by all three credit agencies. Aurangzeb sees further upgrades and the challenge is to get into a “single-B” category, which allows the country to return to global bond markets to raise funds.

“The country is very keen, to tap the Panda bonds and the Chinese capital markets,” Aurangzeb said on the sidelines of the Asian Financial Forum in Hong Kong. “We have been remiss as a country not to tap it previously.”

The latest figure is slightly lower than the $300 million the finance minister was targeting in a March 2024 interview. China International Capital Corporation is advising Pakistan on the issuance of Panda bonds, Aurangzeb said.

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Pakistan has enjoyed some stability from two years ago when an IMF bailout deal was in limbo and inflation and interest rates were above 20%. The government is optimistic it will meet the terms for an ongoing $7 billion loan.

The IMF, which is scheduled to visit Pakistan next month, wants Pakistan to broaden its tax base and reach a tax-to-GDP ratio of 13.5%, from 10% in December, Aurangzeb said.

“We are well on our way to achieve that target, 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,” he said.

After Pakistan clinched the IMF bailout last year, it has been getting some reprieve, including from cooling inflation that provides space for policymakers to cut borrowing costs further and help prop up a nation that remains hammered by structural weaknesses. Stronger remittances, a bright spot, helped shore up currency reserves.

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