Pakistan is set to issue its first-ever Panda bond in the coming weeks, Finance Minister Muhammad Aurangzeb announced on Wednesday, marking a milestone in the country’s international debt diversification strategy. The bond, denominated in Chinese renminbi (RMB), is expected to target $250 million and represents a strategic move to tap the world’s second-largest and second-deepest capital market.
Speaking at a seminar organized by Nutshell Group titled Resetting Pakistan’s Economic Direction, Aurangzeb noted that Pakistan’s prior international debt issuances had been in US dollars, euros, or Islamic sukuk. Issuing in RMB and swapping it into dollars provides a 2.5% differential, he explained, highlighting the incremental benefits of diversification in reducing debt servicing costs.
The finance minister said Pakistan’s debt-to-GDP ratio has fallen to 70% from 75%, while the average debt maturity has been extended to more than four years, reducing refinancing pressures. “Last year, we saved around Rs850 billion in debt servicing. If all goes well, we expect similar savings this year,” he added, attributing part of the improvement to declining policy rates.
Aurangzeb also emphasized ongoing structural reforms, noting that 24 state-owned enterprises (SOEs) have been handed over to the Privatisation Commission. Citing inefficiencies, the minister stated that nearly Rs1 trillion is lost annually due to underperforming SOEs. He mentioned the closure of entities such as PWD, Utility Stores Corporation, and PASSCO, attributing the decision to corruption embedded in subsidy systems.
On the trade and industry front, the finance minister highlighted tariff reforms, including reductions in regulatory and customs duties. He described these as the first comprehensive reforms in 78 years aimed at reducing input costs, enhancing competitiveness, and positioning Pakistan for what he termed an “East Asia moment.” Aurangzeb stressed that historically, Pakistani industries have been protected, limiting export orientation and competitiveness.
Acknowledging challenges, Aurangzeb said that while 20 new foreign investors—including Google, Aramco, Turkish Petroleum, BYD, and Samsung—entered Pakistan in the last 18 months, some firms have exited due to high taxation, energy costs, and financing issues. He cited examples like Nestlé and Unilever, which adapted through local sourcing and are now exporting profitably.
On capital markets, the minister reported significant growth at the Pakistan Stock Exchange, with 135,000 new investors added over 18 months, 280 new company registrations, nine IPOs last fiscal year, and 16 more planned. He also highlighted the digital economy, noting that Pakistan has roughly 40 million crypto users and a large freelancer base. Aurangzeb emphasized the importance of regulation, particularly for crypto trading, and highlighted opportunities for freelancers to increase earnings through blockchain skills.
On governance and inclusion, the finance minister announced that all government payments will be routed through digital channels by June this year. Concluding his address, Aurangzeb cautioned that to achieve a $3 trillion economy by 2047, Pakistan must reduce its population growth rate of 2.55%, stressing that economic growth alone would not suffice without demographic management.
The planned Panda bond, coupled with structural reforms, privatization efforts, and digital economy initiatives, underscores Pakistan’s multifaceted approach to stabilizing its economy, attracting foreign investment, and modernizing its financial and industrial sectors.
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