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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 Friday at his office in Islamabad.
Muhammad Aurangzeb, Pakistan’s finance minister, during an interview in Islamabad, Pakistan, on Friday, March 22, 2024. Aurangzeb 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. Photographer: Asad Zaidi/Bloomberg
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 eurobonds, 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 undertaxed 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 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.
(Updates with additional comments from minister)
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 Friday at his office in Islamabad.
Muhammad Aurangzeb, Pakistan’s finance minister, during an interview in Islamabad, Pakistan, on Friday, March 22, 2024. Aurangzeb 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. Photographer: Asad Zaidi/Bloomberg
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 eurobonds, 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 undertaxed 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 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.
(Updates with additional comments from minister)
