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.