Pakistan secures $285m in guarantees from ADB, AIIB
Pakistan has secured $285 million in guarantees from the Asian Development
Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) to issue its
first-ever Panda bond worth $250 million in China.
The guarantees are designed to strengthen investor confidence, allowing
Pakistan to access China’s high-grade bond market for financing green and
sustainable development projects.
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Multilateral backing
Under the arrangement, ADB will provide up to $160 million in coverage,
while AIIB will extend up to $125 million. Together, these guarantees will
enable the Panda bond to achieve a AAA
rating in China, lowering borrowing costs for Pakistan and
improving debt sustainability.
Despite recent upgrades, Pakistan’s sovereign credit rating remains below
investment grade, limiting its direct access to global capital markets. The
support from ADB and AIIB is expected to ease this challenge by de-risking the
issuance.
Project Financing
Proceeds from the bond are earmarked for priority projects, including:
·
$76.5 million
for a telemetry system on the Indus Basin irrigation network
·
$71 million
for the Power Distribution Strengthening Project
·
$27 million
for a cancer hospital in Islamabad
·
$76 million
for the Jinnah Medical Complex and Research Centre
Bond Structure and Timeline
The Panda bond is part of a broader $1
billion programme, with the first issuance planned by December 2025, pending regulatory
approvals. The bond will carry a fixed-rate coupon with a three-year tenor.
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Analysts expect the annual coupon rate to fall between 3% and 4%, supported by the multilateral guarantees, making it a lower-cost option compared to other external borrowings.
Strengthening debt strategy
The finance ministry has already engaged underwriters, legal counsel, and a
Chinese credit rating agency to facilitate the issuance. Officials note the
move is part of a broader strategy to diversify funding sources and secure
non-debt creating inflows, especially as Pakistan’s exports have stagnated at
around $5 billion in the first two months of the current fiscal year.
Source: Profit Pakistan