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Panda Bonds: New Financial Strategy of Pakistan Cabinet and China

Dr. Firdous Ashiq Awan meeting with Chinese Ambassador Yao Jing

Dr. Firdous Ashiq Awan meeting with Chinese Ambassador Yao Jing

Pakistan has taken a new step in the aim of raising Foreign Exchange. On a positive note, Pakistan's cabinet has approved this new financial strategy. However, Panda bond is a Chinese Renminbi-denominated bond and from a non-Chinese issuer sold in the People's Republic of China. These bonds were first issued in the year 2005 in the International Finance Corporation and the Asian Development Bank.

The Chinese government has been negotiating for the sale of these bonds for several years. They were concerned about the possible effects on their currency peg. A currency peg is a country’s or government’s exchange rate policy whereby it attaches or pegs the central banks’ rate of exchange to another country’s currency. So now, as per these bonds, the government of Pakistan has decided to launch Panda bonds to raise loans from Chinese capital markets.

Launching the Panda Bonds will make Pakistan help China in bringing up the value of the currency on par with the US dollar. Finance Ministry of Pakistan has told that it is one of its multi-pronged steps to serve its foreign financing needs. Panda bonds will help Pakistan to diversify its base of the capital market. China is Pakistan's largest Trading Partner. Pakistan has its highest trade deficit with China. Issuing Panda bonds gives many possibilities to bridge this gap.

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Panda Bonds: New Financial Strategy of Pakistan Cabinet and China

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