Pakistan’s Interest in Chinese Capital Markets
Finance Minister Muhammad Aurangzeb announced that Pakistan is eager to tap into Chinese capital markets as part of its strategy to raise international finances. His comments were made on Wednesday during the Pak-China Business Forum in Shenzhen.
“Next fiscal year, we aim to launch Pakistan’s inaugural Panda bond to access the Chinese capital market, which is the second largest and deepest in the world,” stated Aurangzeb. He added that Pakistan is currently in the preparatory stages and will engage with Chinese regulatory authorities to follow a guarantee-back structure similar to Egypt’s approach for the Panda bond.
Anticipation of Policy Rate Reduction
Aurangzeb projected a reduction in the policy rate this year, citing a significant decrease in the inflation rate, which has dropped from a peak of 38% to just over 11% in May. “It has exceeded market expectations,” he said, noting declines in both core and food inflation.
The Pakistan Bureau of Statistics (PBS) reported that the country’s headline inflation fell to 11.8% year-on-year in May, down from 17.3% in April.
“While the policy rate decision lies with the central bank, we anticipate a downward adjustment in line with the inflation trend, as we now have sufficient positive real interest rate buffer,” Aurangzeb explained. “This should lead to some relief in Pakistan’s interest rate regime within this calendar year.”
Addressing Investor Concerns
Aurangzeb acknowledged some temporary issues experienced by Chinese partners and investors, such as delays in payments and repatriation. “I assure you these were not structural problems. We are committed to providing support and assistance,” he said.
Positive Economic Indicators
The finance minister highlighted that all macroeconomic indicators in Pakistan are on a positive trajectory. “The agriculture sector’s GDP growth of 6.25% this fiscal year is particularly noteworthy,” he said. Aurangzeb also mentioned a primary surplus on the fiscal side due to fiscal consolidation and discipline, steady remittances, and rising exports in textiles, agriculture, and Information Technology.
He projected that the current account deficit would be less than a billion dollars this fiscal year and noted ongoing discussions with the International Monetary Fund (IMF) for a larger, longer-term program to ensure sustainable macroeconomic stability and implement structural reforms.
