Pakistan plans more panda bonds under 7.2 billion Yuan program

Pakistan’s economy grew by 3.7 percent in the last financial year, while the government expects growth to reach around 4 percent

Islamabad / Bangkok: Pakistan’s economy grew by 3.7 percent in the last financial year, while the government expects growth to reach around 4 percent in the current financial year, Finance Minister Muhammad Aurangzeb has said, as he outlined plans to increase tax collection, attract foreign investment and reduce the cost of borrowing.

Aurangzeb shared the government’s economic plans during meetings with international investors, financial institutions and foreign officials on the sidelines of the World Bank and International Monetary Fund annual meetings in Bangkok, Thailand. He said Pakistan was moving beyond economic stabilisation towards growth driven by investment, exports, technology and private businesses.

The finance minister said tax revenues had increased by 40 percent over two financial years, while the tax to GDP ratio had reached around 10.3 percent. He said the government was continuing reforms to bring more people and businesses into the tax system, improve tax collection and reduce the burden on the economy.

The government has also allocated Rs838 billion to the Benazir Income Support Program to provide financial assistance to vulnerable households. Aurangzeb said economic reforms must be accompanied by targeted support for people who need it, along with efforts to create jobs, improve education and develop skills.

Speaking at a JP Morgan investment seminar, Aurangzeb highlighted improvements in foreign exchange reserves, the current account balance and government finances. He also pointed to continued primary budget surpluses and Pakistan’s renewed access to international financial markets.

He said the government wanted to replace costly, short term borrowing with financing that allowed more time for repayment, without increasing the country’s external debt stock. He reaffirmed Pakistan’s commitment to its IMF program, structural reforms and a careful monetary policy to control inflation.

Aurangzeb said Pakistan was also working to manage energy purchases carefully, support vulnerable families and improve coordination between federal and provincial governments. He stressed that stronger trade and investment partnerships were needed to support lasting economic growth.

In a meeting with Moody’s representatives, the finance minister discussed Pakistan’s sovereign credit rating, recent rating upgrade and improving economic indicators. He said stronger foreign exchange reserves, a controlled current account deficit and lower forward liabilities of the State Bank had helped improve the country’s external position.

Aurangzeb sought Moody’s views on how Pakistan could achieve a stronger credit rating. He also discussed how rating assessments should balance political risks with improvements in economic performance. The government wants to continue reforms and sustain economic progress even after its current IMF program ends.

Pakistan is also seeking new financing for major infrastructure projects. During a meeting with OPEC Fund for International Development President Dr Abdulhamid Alkhalifa, Aurangzeb discussed financing for the M6 motorway, including approval of the first tranche, the pending loan agreement and the remaining tranches.

The two sides also discussed modernising the Main Line 1 railway and improving power transmission infrastructure. Both stressed the need to speed up approvals and improve coordination so projects could be completed on time. Aurangzeb thanked the fund’s president for the invitation to visit the institution, where a project agreement could potentially be signed.

In talks with the International Islamic Trade Finance Corporation chief executive, Engineer Adeeb Y. Al Aama, Aurangzeb reviewed a remaining financing tranche and discussed adjusting its cost to reflect Pakistan’s improved market conditions. Technical teams from both sides will explore possible changes in pricing and the amount of financing.

The discussions also covered digital product passports, which can help textile exporters provide information about their products and meet European Union market requirements. Both sides discussed connecting Pakistan’s single window trade system with regional systems to make trade with Southeast Asian countries easier. They reaffirmed their commitment to improving Pakistan’s export competitiveness.

Pakistan is seeking to expand its access to international capital markets, particularly through China. In a meeting with Chinese Finance Minister Lan Fo’an, Aurangzeb discussed Pakistan’s first Panda Bond issuance, which carried a competitive interest rate of 2.5 percent and attracted strong investor demand, according to the Finance Division.

The Asian Infrastructure Investment Bank supported the issuance through credit enhancement. Pakistan plans to issue Panda Bonds again under an approved programme worth 7.2 billion Chinese yuan, with continued support from the AIIB. Aurangzeb also highlighted Pakistan’s return to the Eurobond market after four years and its aim to become a regular borrower in China’s capital market.

The ministers discussed Pakistan’s chairmanship of the Shanghai Cooperation Organisation, preparations for the forthcoming summit and a meeting of SCO finance ministers in Islamabad. Lan Fo’an expressed his intention to attend the finance ministers’ meeting.

Both sides also discussed the proposed SCO Development Bank, with China seeking Pakistan’s active participation in consultations and efforts to build agreement on the institution. The meeting also covered proposed changes to the route of a China Pakistan highway project and cooperation with Alibaba on digital development and artificial intelligence skills.

Aurangzeb also met United Nations Deputy Secretary General Amina J. Mohammed to discuss development funding, debt and climate resilience. He called for a stronger voice for developing countries in global financial institutions and discussed improving the Borrowers’ Forum through shared learning, stable leadership and an effective virtual secretariat.

The talks covered funding for global development goals, poverty reduction, social protection and decent jobs. The two sides also discussed the shortage of climate financing, making funds easier to access and helping countries prepare projects that can attract investment. Aurangzeb highlighted local currency financing as a way to reduce the risks caused by changes in exchange rates. He also thanked Amina for recognising Pakistan’s mediation efforts during the recent United States and Iran crisis.

Digital technology was another key area of discussion. In a meeting with Alibaba International Digital Commerce, Aurangzeb discussed digital payments, a cashless economy and more transparent delivery of social assistance and targeted subsidies.

He appreciated Alibaba’s support for small businesses, local brands and exports through Daraz and Alibaba.com. The two sides also discussed making e-commerce taxation fair while bringing more businesses into the tax system.

Further talks covered the Pakistan Single Window e-commerce platform, better tracking of international payments and export earnings, cloud infrastructure, artificial intelligence and tax administration. Cybersecurity and stronger institutional capacity were also discussed. Pakistan also explored modernising the postal service’s sorting systems and expanding agricultural exports to China through Alibaba’s retail network.

The finance minister discussed additional reforms at a Bank of America symposium, including widening the tax base, improving tax administration, privatising public enterprises and attracting more private and foreign investment. He said tariff reforms, competitive production costs and targeted financing could help Pakistani businesses compete internationally.

Privatisation plans include power distribution companies and outsourcing airport operations. The government also intends to expand digital payments, financial inclusion, the use of artificial intelligence and technology training to improve efficiency and create new economic opportunities.

Pakistan is also looking to strengthen trade and tourism links with Thailand. Aurangzeb met Thai Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas to discuss increasing bilateral trade, improving cultural ties, promoting tourism in both countries and restarting high level exchanges, including meetings between the two prime ministers.

In a separate discussion with the International Organization for Migration, Aurangzeb highlighted the economic contribution of overseas Pakistani workers and the importance of sending remittances through formal channels. Pakistan received $41.6 billion in remittances last year and expects the amount to reach $44 billion this year.

The meeting also covered early warning systems for disasters, the use of population movement data, training workers for jobs demanded by international employers and expanding safe and legal routes for migration. Both sides discussed climate financing and building stronger institutions to prepare projects capable of attracting funding.

Aurangzeb said Pakistan wanted to strengthen relationships with its long standing partners while building wider links with Gulf countries, Central Asian republics and Southeast Asian nations. He has described the country’s approach to China and the United States as one in which Pakistan works with both rather than choosing one over the other.