The government of Pakistan has secured $285 million in guarantees from two multilateral development banks, the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB), to raise $250 million through Panda bonds in China, The Express Tribune reported.
The guarantees, aimed at boosting Pakistan’s access to China’s high-grade bond market, will support financing for green and environmentally sustainable projects.
This move comes as Pakistan looks to enter the Chinese debt markets for the first time. Despite recent credit upgrades, the country’s credit rating remains sub-investment-grade, which has hindered direct access to international debt markets.
The ADB and AIIB have agreed to provide guarantees for Pakistan’s bond issuance, with ADB covering up to $160 million and AIIB providing up to $125 million in debt coverage. These guarantees will help Pakistan secure a AAA rating for the Panda bond in China, ensuring investor confidence.
According to the news report, the proceeds from the bond issuance will fund a series of key projects. These include $76.5 million for a telemetry system on the Indus Basin irrigation system, $71 million for the Power Distribution Strengthening Project, $27 million for a cancer hospital in Islamabad, and $76 million for the Jinnah Medical Complex and Research Centre.
The bond issuance is part of a broader $1 billion Panda bond programme, and the initial issuance is expected to take place by December 2025, subject to necessary approvals. The bond will have a fixed-rate coupon with a three-year tenor, and analysts expect it to be issued at a lower cost due to the backing of multilateral lenders.
The finance ministry has already engaged transaction underwriters and third-party service providers, including Chinese legal counsel and a credit rating agency, to ensure a smooth issuance process. The expected annual coupon rate for the bond is between 3% and 4%, which is expected to contribute to cost savings and improve Pakistan’s debt sustainability.
This initiative also aligns with the government’s broader effort to secure non-debt creating foreign inflows, despite stagnant exports, which have remained at $5 billion during the first two months of the current fiscal year.
