The Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) have collaborated to support Pakistan’s first issuance of a Panda bond to finance its Sustainable and Green Infrastructure Project, the ADB said on Friday.
Panda Bonds are yuan-denominated bonds issued by foreign governments or institutions. The launch of 1.75 billion yuan (approximately $258 million) sustainable development bond on Thursday marked Pakistan’s first entry into China’s domestic bond market, which is one of the world’s largest capital markets.
The bond marks a milestone in using guarantees to enable a developing member country to access the capital market in China. As the first bond with less than 100 percent guarantee coverage to achieve a domestic AAA rating, it sets a significant precedent for using partial credit guarantees to mobilize private sector capital for emerging markets.
“This transaction not only enabled Pakistan to access the PRC’s (People’s Republic of China) onshore bond market, but also allowed it to secure competitive pricing, supporting the country’s sustainable infrastructure and human capital development,” said ADB Director-General for Central and West Asia Leah Gutierrez.
“The panda bond issuance expands Pakistan’s access to international capital markets.”
The demand for the inaugural tranche exceeded Pakistan’s entire planned Panda Bond program size of 7.2 billion yuan ($1 billion), according to Pakistan’s finance adviser Khurram Schehzad. It reflected growing international investor confidence in the country’s economic outlook and reform trajectory.
The launch ceremony at the Pakistani embassy in Beijing was attended by representatives from the Chinese government and financial institutions, international financial organizations, investors and banking sector stakeholders. The proceeds from the bond will support a range of transformative sub-projects aimed at addressing national priorities in water governance, energy reliability and efficiency, and health care capacity.
“By embedding sustainability objectives into public sector financing, this transaction underscores the Government of Pakistan’s strong commitment to fostering green and sustainable infrastructure development and reinforces the country’s active engagement with international capital markets,” ADB added.