Pakistan’s plan to raise $250 million through Chinese Panda bonds

Pakistan’s plan to raise $250 million through Chinese Panda bonds has hit a snag due to the selection of disputed sites for two projects, which will be funded against the bond proceeds, including the $760 million worth Jinnah Medical Complex.

Because of its weak credit rating, Pakistan cannot directly access Chinese debt markets and has sought credit guarantees from the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).

Government officials told The Express Tribune that guarantors had raised objections to one telemetry project location in Azad Jammu & Kashmir (AJK) and to private ownership claims over the land originally allocated for the Jinnah Medical Complex.

According to officials of a multilateral lending agency, the AJK site issue was resolved after Pakistan agreed to remove the location following objections raised by India. However, the land issue for the Jinnah Medical Complex remains unresolved.

Of the $250 million total debt that Pakistan is desperately trying to raise through Panda bonds in Chinese markets since 2019, $152 million is planned for two projects. Finance Minister Muhammad Aurangzeb has set multiple deadlines for the bond issuance, with the latest expiring on February 28.

Sources said $76.5 million had been projected to be used for the installation of a telemetry system for real-time discharge monitoring at 27 key sites on the Indus Basin irrigation system. Another $76 million is meant for the Jinnah Medical Complex and Research Centre, part of a total funding plan of $760 million, or Rs213 billion.

The AIIB and ADB agreed to provide guarantees for the Panda bond issuance on the condition that the loan would fund sustainable, green projects. However, sources said the projects were selected hastily without adequate due diligence, leading to delays and embarrassment for Pakistani authorities.

Sources also cited internal procedural issues hampering the issuance of the bonds. The external finance wing of the Ministry of Finance, responsible for foreign commercial loans, sovereign bonds and budget support, raised objections to the process.