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Why in News?

  • The government of Pakistan has decided to launch Panda Bonds to raise loans from Chinese capital markets.

Highlights:

    • Launching of Panda Bonds is part of Pakistan’s plans to move towards giving the Chinese currency, a status at par with that enjoyed by the US dollar. The interest rates and the size of the bonds would be decided at a later stage. The Finance Ministry of Pakistan has said that the Panda Bonds are part of its multipronged approach for bridging the foreign financing needs and building foreign exchange reserves.
    • Panda Bonds will help Pakistan to diversify the investor base of capital market issuance and provide a source of raising renminbi.
    • China is Pakistan’s largest trading partner.
    • Pakistan has the highest trade deficit with China.
    • The raising of capital in Chinese currency will aid Pakistan to bridge the deficit.

Panda Bonds:

  • Panda bonds are Chinese renminbi-denominated bonds from a non-Chinese issuer, sold in the People’s Republic of China.
  • The first two Panda bonds were issued in October 2005 on the by the International Finance Corporation and the Asian Development Bank on the same day.
  • The Philippines issued its inaugural Panda bonds in 2018.
  • It was the first ASEAN member to issue Panda bonds.

 

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