Government to use ‘Panda bonds’ to raise money in global markets

An Aug. 17, 2012 file photo shows a Chinese bank staff member counting stacks of 100-yuan notes in Huaibei, east China’s Anhui province. Photo: AFP

The PTI government has decided to reach out to the international capital market for fundraising by issuing Panda Bonds between the range of $500 million to $1 billion.

Panda bonds are basically a foreign issuers’ paper being sold in the Chinese domestic interbank bond market.

“The government intends to issue sovereign Panda Bond in the Chinese capital market. Reputed financial institutions are invited to submit their proposals to work as financial advisers and lead managers for structuring, launching and executing this transaction,” according to a notification of the Ministry of Finance.

Financial institutions have been asked to submit technical and financial proposals by March 20. This is going to be the first international capital market transaction by the PTI-led government.

Related: IMF has softened its stance in talks with Pakistan: Minister of State for Revenue

Panda Bond is likely to be launched in the Chinese market during the month of April 2019,  a source in the ministry of finance told Samaa TV.

Interested financial institutions have been asked to furnish proposals about the programme, its structure, timing, and issues.

Pakistan government has filled the required financing gap till June 2019 and is now working on a medium-term stabilisation programme, which also includes issuance of the sovereign bond, confirmed Finance Spokesperson Dr Khaqan Najib.

Pakistan foreign exchange reserves have started improving with the help of friendly countries.

According to the State Bank, total liquid foreign exchange reserves of the country were recorded at $14.89 billion till February 8. It includes $6.68 billion net reserves with commercial banks and $8.20 billion held by the central bank.

Meanwhile, China is likely to provide $2.5 billion loans to boost the foreign exchange reserves, while Saudi Arabia and the United Arab Emirates have already announced $6 billion packages each.

So far, the PTI government has secured $14.5 billion worth of commitments from these three friendly countries. The government is in constant contact with the IMF to sign a deal for a bailout package most probably in next few months.