In a significant step toward diversifying its external financing sources, the Government of Pakistan is preparing to issue its inaugural Panda Bond—a Renminbi-denominated bond to be floated in China’s onshore bond market.
The issuance, planned before December 2025, will be backed by a credit enhancement guarantee of up to $285 million, jointly provided by the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).
According to an official memorandum issued by the Ministry of Planning, Development and Special Initiatives, the government will raise an initial $250 million equivalent in RMB under a broader Panda Bond program that has a ceiling of $1 billion. This first tranche would mark Pakistan’s debut in China’s domestic bond market, and would be issued through private placement to qualified institutional investors on the Interbank Market.
Credit Risk Mitigation
Due to Pakistan’s current sub-investment-grade sovereign credit rating, the government has secured a co-guarantee structure from ADB and AIIB to achieve a domestic AAA credit rating for the bond. The ADB would guarantee up to $160 million, while the AIIB would cover $125 million, together protecting 95% of the bond’s principal and accrued interest.
Both banks would charge annual and upfront fees for the guarantee, with ADB also levying a commitment fee, and AIIB a processing fee.
The Ministry of Finance will act as the executing agency, with oversight provided by a newly-formed Panda Bond Steering Committee. The committee would coordinate with various implementing agencies to ensure timely project execution and regulatory compliance.
Sustainable Development
In line with conditions set by the guarantors, the bond proceeds would be directed toward green and sustainable development projects. Four projects have been finalized for funding: Telemetry System Installation for real-time water discharge monitoring at 27 sites on the Indus Basin for $76.48 million; Power Distribution Strengthening Project across LESCO, SEPCO, and MEPCO for $71 million; Procurement of Equipment for a Cancer Hospital in Islamabad for $26.89 million; and Jinnah Medical Complex and Research Center, Islamabad for $76 million.
Two additional projects have been kept as backup, including the construction of sewage treatment plants in Islamabad and Jinnah Hospital under Punjab’s Infrastructure Development Authority.
Lower Borrowing Costs
The issuance is expected to lower borrowing costs, reduce refinancing risks, and strengthen financial ties with China. Due to lower yields in the Chinese market and the presence of AAA-rated MDB guarantees, the bond is projected to be issued at an attractive interest rate of 3-4% annually.
Officials from the Planning Commission emphasized that the initiative aligns with the Pakistan Sustainable Financing Framework and would support social welfare, public health, and water infrastructure. The Ministry of Finance would publish annual disclosures on the allocation and use of proceeds, verified by external audits, to ensure transparency and compliance.
“This is a landmark transaction,” a senior official noted, “not only because it opens access to China’s deep capital markets, but also because it channels foreign borrowing toward high-impact development projects.”
The proposal, already submitted to the Prime Minister’s Office and vetted by multiple technical and economic appraisal sections, is recommended for approval in upcoming meetings of the Central Concept Clearance Committee and the Central Development Working Party.
The government also plans future issuances under the Panda Bond program, potentially involving different guarantors and structural variations.