Pakistan is set to issue its first-ever Panda bond within the coming weeks, marking a new chapter in its international financing strategy, Finance Minister Muhammad Aurangzeb announced on Wednesday.
Introduction of Panda Bond
Speaking at a seminar titled “Resetting Pakistan’s Economic Direction,” organized by the Nutshell Group, Aurangzeb explained that Pakistan’s previous international debt issuances were denominated in US dollars, euros, or Islamic sukuk. The upcoming Panda bond will be issued in Chinese renminbi (RMB), which represents the world’s second-largest and second-deepest capital market.
The minister highlighted that swapping RMB proceeds into dollars offers a 2.5% cost advantage, emphasizing that every saving contributes positively to the country’s fiscal health.
Debt Management and Fiscal Savings
Pakistan’s debt-to-GDP ratio has improved, declining from 75% to 70%, while the average maturity of debt has been extended to over four years. This extension reduces refinancing pressure and associated costs.
Aurangzeb noted that last year the government saved approximately Rs850 billion in debt servicing costs, with expectations to maintain similar savings this year. These improvements are attributed not only to lower policy rates but also to broader fiscal management efforts.
Privatization and State-Owned Enterprises
The government has transferred 24 state-owned enterprises (SOEs) to the Privatisation Commission, aiming to address significant financial losses. Aurangzeb cited a recent report estimating annual losses near Rs1 trillion from SOEs.
He explained that closures of entities such as the Public Works Department (PWD), Utility Stores Corporation, and PASSCO were driven by the heavy subsidies and corruption associated with them, representing a substantial fiscal burden.
Structural and Tariff Reforms
Tariff reforms have been a key focus, including reductions in regulatory, customs, and additional customs duties to lower costs on intermediate and raw materials. Aurangzeb described these reforms as unprecedented in the past 78 years and suggested they could mark Pakistan’s “East Asia moment.”
The minister acknowledged that Pakistani industries have historically been protected, which limited competitiveness and export orientation.
Foreign Investment and Market Activity
Over the past 18 months, 20 new foreign investors have entered Pakistan, including major companies like Google, Aramco, Gunvor, Turkish Petroleum, BYD, Chery Auto, Abu Dhabi Ports, Nova Mineral, Mashreq Digital, and Samsung.
While some firms have exited due to challenges such as high taxation, energy costs, and financing expenses, others like Nestlé and Unilever have adapted through local sourcing and are now experiencing strong margins and export growth.
The Pakistan Stock Exchange has also seen growth, adding 135,000 new investors in 18 months, with 280 new companies registered. Nine initial public offerings (IPOs) occurred last fiscal year, and 16 more are planned.
Emerging Sectors and Digital Economy
Pakistan hosts around 40 million cryptocurrency users with significant trading volumes. Aurangzeb stressed the importance of regulating this activity to ensure a proper framework.
Additionally, Pakistan ranks third globally in freelancer population. With upskilling in blockchain technologies, freelancers currently earning $12–14 per hour could potentially increase their earnings to $50–250 per hour.
Governance and Future Outlook
By June this year, the government aims to route all payments digitally, enhancing transparency and efficiency.
Looking ahead, Aurangzeb warned that to achieve the goal of becoming a $3 trillion economy by 2047, Pakistan must reduce its population growth rate from the current 2.55%. He emphasized that economic growth alone will not suffice without addressing demographic challenges.
