ISLAMABAD: Leading national and international financial experts, policymakers and energy specialists underscored the importance of Panda bonds as a critical instrument to mobilise sustainable investments for financing Pakistan’s renewable energy transition.

The Sustainable Development Policy Institute (SDPI) organised a webinar, “Panda Bonds: mobilising sustainable investments for Pakistan’s renewable energy future” that explored how these yuan-denominated financial instruments could address Pakistan’s urgent financing needs, offer opportunities to restructure its debt and catalyse green infrastructure development amidst prevailing economic challenges.

Eraj Hashmi, Director Debt, Debt Management Office, Ministry of Finance, explained government’s preparations to issue sustainable Panda Bonds within the current calendar year. He highlighted the attractive financial terms, particularly lower interest rates compared to Eurobonds, as a strong incentive for Pakistan’s participation.

Mr Hashmi stated that the ministry was actively engaging with Asian Infrastructure Investment Bank (AIIB) and credit rating agencies to ensure successful market entry, viewing this issuance as an important step toward establishing stronger sustainability frameworks. He also announced the imminent issuance of a Green Sukuk alongside the Panda Bond, highlighting the government’s broader strategic commitment to green financing.

Hamid Sharif, former Managing Director AIIB, highlighted the critical implementation factors necessary for Pakistan’s successful Panda Bond issuance, noting the importance of fulfilling green commitments to maintain investor trust.

He raised concerns about Pakistan’s low credit rating, recommending structured credit enhancements to improve market confidence. Mr Sharif also urged Pakistan to address broader investor concerns around security issues and challenges related to profit repatriation.

Dr Hassan Daud Butt, Senior Adviser Energy China and former project director CPEC, emphasised the importance of timing, clear communication and effective narrative building around the Panda Bond issuance.

He suggested linking Panda Bonds directly to high-visibility CPEC projects such as Main Line-1 (ML-1) railway development and sustainable tourism initiatives in Gilgit-Baltistan.

Dr Butt recommended leveraging existing partnerships with Chinese institutions and companies already familiar with Pakistan’s investment environment, proposing targeted investor engagement through policy dialogues and road shows. He recommended considering late 2025 as an ideal period for Panda Bond issuance due to the current economic scenario.

Dr Khalid Waleed, Research Fellow at SDPI, stressed the urgency of finding new avenues for financing, given Pakistan’s current economic vulnerabilities. He underlined the need to shift from traditional Eurobond markets to innovative financial instruments, particularly Panda Bonds’ ability to integrate into Pakistan’s sustainable development agenda, reinforcing deeper financial and economic integration with China.

Another SDPI fellow emphasised Panda Bonds’ strategic advantages, including cost-efficiency, enhanced liquidity, currency diversification, and financial resilience, making them a particularly attractive instrument for Pakistan’s upcoming $300 million issuance, aimed at financing sustainable energy infrastructure.

Dr Christoph Nedopil Wang, Director of Griffith Asia Institute, highlighted the potential opportunities offered by Panda Bonds, noting the significant appetite among Chinese investors reflected by high oversubscription rates compared to traditional bonds.

Dr Wang suggested that Pakistan should consider innovative financing models, citing Egyptian sustainable bond models, to attract investment effectively. He advised Pakistan to proactively address transaction costs and currency exchange risks associated with Panda Bond issuance.

Hongyu Guo from Greenovation Hub, China, presented insights into China’s rapidly expanding Panda Bond market, highlighting significant growth in both issuance volume and value.

Published in Dawn, March 14th, 2025