Pakistan’s plan to raise $250 million through Panda bonds in China’s domestic debt market has encountered fresh obstacles, as disputes over project sites and procedural concerns threaten to delay the issuance beyond the latest February 28 deadline set by Finance Minister Muhammad Aurangzeb.
The government has been attempting to access the Chinese interbank bond market since 2019 but faces constraints due to its weak credit rating. To facilitate the issuance, Pakistan sought credit guarantees from the Asian Development Bank and the Asian Infrastructure Investment Bank. Both multilateral lenders agreed in principle to provide guarantees on the condition that the proceeds would finance sustainable and environmentally friendly projects.
However, officials familiar with the matter told The Express Tribune that guarantors raised objections to the selection of certain project sites. One of the concerns related to a telemetry installation project in Azad Jammu and Kashmir, while another involved private ownership claims over land originally allocated for the $760 million Jinnah Medical Complex and Research Centre in Islamabad.
According to officials from a multilateral agency, the issue regarding the telemetry site in Azad Jammu and Kashmir was resolved after Pakistan agreed to remove the disputed location following objections raised by India. International lenders generally refrain from financing projects in contested territories. However, the land dispute linked to the Jinnah Medical Complex remains unresolved and continues to pose a major hurdle.
Of the planned $250 million bond issuance, $152 million has been earmarked for two key initiatives. Approximately $76.5 million is intended for installing a telemetry system for real-time discharge monitoring at 27 sites across the Indus Basin irrigation system. Another $76 million has been allocated to the Jinnah Medical Complex, which forms part of a broader Rs213 billion funding plan.
If the bond proceeds are eventually secured, the allocation would also include $71 million for an ADB-funded Power Distribution Strengthening Project and nearly $27 million for equipment for a cancer hospital in Islamabad. However, delays in site approvals and compliance requirements have slowed progress.
The bond issuance is also contingent upon listing approval from the National Association of Financial Market Institutional Investors in China, which regulates access to the country’s interbank bond market. In addition, both ADB and AIIB will charge guarantee fees ranging between 0.8 percent and 1.25 percent.
Sources indicated that internal procedural disagreements within the Ministry of Finance have further complicated matters. The external finance wing reportedly objected to being sidelined during Panda bond negotiations, consultant appointments, and the hiring of underwriters, legal counsel, and a Chinese credit rating agency. Concerns were also raised about contractual staff conducting discussions without full bureaucratic oversight.
Land disputes have proven particularly sensitive. The Capital Development Authority had initially identified land in sector H-16 for the Jinnah Medical Complex and informed Prime Minister Shehbaz Sharif that it was free of encumbrances. The prime minister performed the groundbreaking ceremony in July 2024. Subsequently, lenders were informed of pending dues claimed by land occupants, prompting further scrutiny. Following objections from guarantors, the site was shifted to sector H-11, requiring a fresh environmental and social impact assessment to meet lender standards. The chief executive officer of the project, Capt Mohammad Mehmood, confirmed the site change and the need for updated assessments.
While the Ministry of Finance believes the Panda bond programme could eventually raise up to $1 billion, some sources question whether it is prudent to use an AAA guarantee for a relatively small, three-year $250 million issuance, particularly given currency convertibility risks and associated costs such as swaps and issuance fees.
In the meantime, the government is exploring alternative financing options to bridge potential funding gaps, including negotiations for a $600 million loan from Standard Chartered Bank. As discussions continue, the success of Pakistan’s first entry into China’s domestic bond market remains uncertain, hinging on regulatory approvals, project compliance, and the resolution of outstanding disputes.
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