Islamabad : March 22 , 2024 : Pakistan’s new finance minister said he’s keen to tap Chinese investors by selling
as much as $300 million in Panda bonds
for the first time ever this year.
Selling yuan-denominated debt will allow
Pakistan to diversify its funding sources
and reach investors in a new market,
Muhammad Aurangzeb, said in an
interview with Bloomberg on Friday at his office in Islamabad.
It’s something “we should have looked at
quite frankly some time back,” he said.
China has the “second-largest and
deepest bond market in the world” and it
is the “right thing to do for the country” to tap the market, given Pakistan has already sold dollar and euro bonds, he said.
Aurangzeb said the initial Panda bond
sale would be about $250 million to $300
million, which would be followed by
further issuances.
A former banker from JPMorgan Chase &
Co., Aurangzeb, 59, was picked as finance
minister by Prime Minister Shehbaz
Sharif in March after a contentious
election.
He takes office at a time when economic
pessimism in the country is at a record
high and the government is trying to
avoid defaulting on its debt. Pakistan has the highest inflation rate in Asia of more than 20% and faces $24 billion of external debt payments in the fiscal year starting July, three times its foreign-exchange reserves The finance minister said the government’s cash balances are strong enough that it’s able to pay its debts on time. The payments are unlikely to put pressure on the currency, and he expects the rupee to remain stable, he said. “I don’t really see a huge pressure on the rupee at this point in time,” he said. “As we go forward, I think it’s going to remain range bound around these
levels.” The “wildcard” is oil prices, he
added, which remain uncertain given the
Red Sea attacks.
Pakistan’s rupee is up 1.3% this year,
according to local pricing compiled by
Bloomberg, among the best-performing
currencies in Asia.
Aurangzeb’s most pressing challenge is
negotiating new loans with the
International Monetary Fund to help
bolster the country’s reserves right after the current bailout program ends in
April. Pakistan remains heavily reliant on IMF support, and has received 23 bailout packages from the Washington-based lender since gaining its independence in 1947, among the most of any country in the world The IMF said earlier this week that Pakistan has expressed interest in a new medium-term program to improve its fiscal and external weaknesses and strengthen its economic recovery.
Analysts expect the IMF program to be
much tougher than recent loan deals.
The minister will have to raise electricity and gas prices that may stoke public anger and find ways to increase revenue from under taxed sectors such as retail and real estate, which have successfully blocked such moves in the past.
Aurrangzeb said Friday Pakistan will seek
a new loan program from the IMF of at
least three years. Further details will be discussed after the Washington-based
lender’s annual spring meetings, he said.
Previously a CEO with JPMorgan’s Global
Corporate Bank in Singapore, Aurangzeb
was most recently head of Pakistan’s
biggest bank by deposits, Habib Bank
Ltd., for the past six years. Panda bonds are yuan-denominated instruments sold in China by offshore issuers, including companies, multilateral agencies and TV governments. The market has drawn issuers including Egypt and Hungary, thanks to its lower cost of borrowing. Growth in Panda bond issuance could easily double in 2024, from about 103.35 billion yuan ($14.3 billion) last year, according to Bloomberg Intelligence