Pakistan to Launch Historic First Panda Bond in Chinese Market Next Week

Pakistan to Issue Historic First ‘Panda Bond’ Next Week
Interest Rate 3-4%, 95% Guarantee by ADB and AIIB, Strong Interest from Chinese Investors
Islamabad Ali Imran Chattha.
 

Pakistan’s Finance Minister announced on Saturday in a press conference that Pakistan will issue its first-ever Panda Bond in the Chinese capital market next week. The bond will be denominated in Chinese Yuan (RMB) and aims to raise funds from Chinese institutional investors.
Bond Details
Issue Size: $250 million (part of a $1 billion programme)
Tenor: 3 years
Expected Coupon Rate: 3 to 4 percent per annum (approximately 4% according to sources)
Issuance Method: Private Placement offered only to Qualified Institutional Buyers (QIBs)
Financial Advisors and Underwriters: China International Capital Corporation (CICC) and Habib Bank Limited
Guarantee Structure How the Bond Will Get AAA Rating
Since Pakistan’s own credit rating is sub-investment grade, the following guarantee structure has been arranged:
Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) will jointly provide a 95% guarantee on the principal amount and unpaid interest.
Total Guarantee Limit: $285 million (ADB: $160 million, AIIB: $125 million)
This partial guarantee will enable the bond to receive a local AAA rating in the Chinese market, significantly lowering the borrowing cost.
Guarantee Fees:
ADB: 50 basis points per annum + 25 bps one-time
AIIB: 50 basis points per annum + 25 bps one-time
Chinese Investors’ Response
According to the Ministry of Finance, Chinese institutional investors have shown strong interest in the bond. This enthusiasm is linked to the improving outlook of Pakistan’s economy and the successful implementation of the IMF programme.
Use of Proceeds (Green Projects Only)
The funds raised will be used exclusively for environmentally friendly (green) projects, including:
Water telemetry systems (for water monitoring)
Improvement of power distribution infrastructure
Establishment of a cancer hospital
Economic Context
Challenges Facing Pakistan:
Rising import bill due to potential disruptions in the Strait of Hormuz and tensions with Iran
Inflationary pressures persist, yet the economy is projected to grow at 3.7% to 4%
Recent Financial Arrangements:
IMF released $1.32 billion
$750 million raised through Eurobonds last month
Plan to convert the $3.5 billion UAE facility into Eurobonds
Important Update Possible Delay
Sources indicate that AIIB Board approval is still pending. As a result, the bond issuance may be delayed until January or February 2026. However, the Ministry of Finance has expressed hope that all formalities will be completed soon.
This report is based on statements from Reuters, BBC, ADB, AIIB, and Pakistan’s Ministry of Finance..