Panda bond push: Pakistan gets 5 bids from China to shore up finances

Pakistan has received five proposals from Chinese firms to help in issuing Panda bonds, as the country moves forward with plans to access global capital markets after making progress in shoring up its finances.

According to a statement from the finance ministry, three law firms and two credit rating agencies submitted bids by the deadline. In comparison, two local Pakistani firms expressed interest in serving as domestic legal advisors for the bond issuance. Bloomberg reported that the ministry is reviewing the proposals to make a final decision.

Last week, Pakistan sought cooperation from Chinese institutional investors to launch Panda Bonds to raise between $250 million and $300 million initially to improve the financial stability of a cash-strapped country that is grappling with several other challenges such as high inflation and declining forex reserves.

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Pakistan has secured a $7 billion, three-year financial assistance package with the International Monetary Fund (IMF), pending approval from the Fund’s Executive Board. According to reports, this deal aims to support Pakistan in achieving macroeconomic stability and fostering an environment conducive to robust, inclusive, and sustainable economic growth.

What are Panda Bonds?

Panda Bonds are a type of bond issued in China by foreign entities, denominated in renminbi, and targeted at Chinese investors. They serve as a platform for foreign countries and companies to raise capital in China’s domestic market. Unlike Dim Sum Bonds, which are also renminbi-denominated but issued in Hong Kong for foreign investors, Panda Bonds are specifically sold in China and subject to domestic regulations.

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Pakistan aims to tap into this market by issuing Panda Bonds, thereby diversifying its funding sources and bolstering its foreign exchange reserves through Chinese investment.