Tuesday, 18 January 2022

Pakistan to launch Panda Bond in Chinese Yuan

Photo: Xinhua

ISLAMABAD: For the first time in the country’s history, Pakistan on Thursday approved launching of Panda Bond in Chinese-denominated Yuan currency with possible transaction size equivalent to $500 million in two different tranches in order to finance its yawning trade deficit with Beijing. $300 million for Pakistan’s struggling economy. Pakistan’s trade deficit with China stood at around 12 billion dollars per annum and Islamabad is asking for Asean level tariff reduction on its exportable items. China has recently granted market access during the premier’s visit, helping Islamabad to boost its exports to China.

The Ministry of Finance Adviser and official spokesman, Dr Khaqan Najeeb, when contacted, said the government is successfully continuing its multi-pronged approach for bridging foreign financing needs and building foreign exchange reserves. He said Panda Bond’s approval by the cabinet is a part of this strategy. He said this is a well-thought-out decision after several rounds of discussions with Chinese banks, investment groups, regulatory authorities in China and stock exchange and traditional financial advisers.

The Panda bonds, he said, will help the government diversify investor base of capital market issuance and provide a source of raising Renminbi. The size, tenor and pricing would be determined on the market response at the time of issuance. The issuance will be done in several rounds. A good response is expected considering the interest shown by Chinese banks and investment groups, he added.

The sources said that first of all, this idea was floated during the last PML-N government but the Debt Office in the Ministry of Finance had always cautioned the government to review fluctuation of Chinese currency versus US Dollar before moving ahead as it should be determined that in case of losses who was going to absorb it keeping in view the fluctuating currency rates.

Top economist Dr Ashfaque Hassan Khan had proposed to the PTI government to launch RMB-based bond several months back, but the government wasted time and now decided to move ahead. “The timing of launching the bond has importance and now the government has decided to explore this option in the second half of the current fiscal year,” said the sources.

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