Panda power: Pakistan to tap China debt market with first sale of yuan-priced notes

Islamabad turns to ‘panda bonds’ to secure cheaper credit and diversify its borrowing into yuan-denominated funding, with a focus on sustainable development

Pakistan is poised to become the latest partner in a China-centred trading network, known as the Belt and Road Initiative, to sell “panda bonds”.

Islamabad seeks to raise as much as US$250 million through its first-ever sale of the bonds – yuan-denominated debt instruments sold by foreign entities in mainland China’s onshore market – as early as this week.

Finance Minister Muhammad Aurangzeb confirmed on Saturday that Islamabad was preparing to access Chinese capital markets with the sale – the first tranche of a broader US$1 billion programme that Islamabad has been pursuing since at least December.

The three-year bonds, focused on sustainable development, will carry guarantees from the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank covering 95 per cent of the debt issuance, according to Bloomberg.

The planned deal comes as Pakistan steps up its return to international capital markets following years of financial instability. Aurangzeb said the country successfully raised US$750 million in April through the sale of Eurobonds – international debt typically priced in US dollars, despite the name. That marked Islamabad’s first international bond sale in four years.

The panda bonds would add a yuan-denominated funding source to that effort, allowing the nation to benefit from lower Chinese interest rates compared with the higher costs of borrowing in US dollars.

The structure mirrors a model Aurangzeb flagged in early 2025, when he said that Islamabad would replicate Egypt’s AIIB-backed credit enhancement to access China’s local capital markets. He described the move as “absolutely critical” for Pakistan in efforts to diversify its funding base. Pakistan has faced persistent debt troubles in recent years, receiving a US$7 billion International Monetary Fund bailout in 2024 after being pushed to the brink of default in 2023.