ISLAMABAD: Amid worsening economic struggles confronting Pakistan, yuan-denominated financial instruments are likely to offer opportunities to the country to restructure its debt and drive green infrastructure initiatives.

This was the crux of a high-level webinar, Panda Bonds: Mobilising Sustainable Investments for Pakistan’s Renewable Energy Future, on Thursday. It was organised by the Sustainable Development Policy Institute (SDPI).

Leading financial experts, policymakers, and energy specialists underscored the strategic importance of Panda Bonds as a critical instrument to mobilise sustainable investments for financing the country’s renewable energy transition.

Eraj Hashmi, the director of debt management at the finance ministry, outlined the government’s preparations to issue sustainable Panda Bonds within the current calendar year.

Yuan-denominated instruments can help Pakistan fight economic woes, experts say

He spoke about attractive financial terms, particularly lower interest rates compared to Eurobonds, as a strong incentive for Pakistan’s participation. Mr Hashmi stated that the finance ministry was engaging with the 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 disclosed that the issuance of a Green Sukuk was under consideration, highlighting the government’s commitment to green financing.

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

He expressed concern over Pakistan’s low credit rating, recommending structured credit enhancements to improve market confidence. Mr Sharif called upon the government to address broader investor concerns around security issues and challenges related to profit repatriation.

High-visibility projects

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

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

Dr Butt recommended leveraging existing partnerships with Chinese institutions and companies already familiar with this country’s investment environment, proposing targeted investor engagement through policy dialogues and road shows.

He said the second half of the current calendar year was an ideal time for issuance of Panda Bond.

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

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

Published in Dawn, March 14th, 2025