Pakistan Falls Deeper Into China Debt Trap, Launches First Panda Bond in Yuan

Islamabad: Pakistan, which is facing economic crisis, increasing debt and shortage of foreign exchange, has now adopted a new way to raise money from China. Pakistan has issued “Panda Bond” for the first time in the domestic market of China. This is being considered a big economic step for Pakistan, because through this it will get an opportunity to raise funds from Chinese investors.

After all, what is Panda Bond?

Panda bond is a bond in which a foreign country takes a loan from the Chinese market in Chinese currency i.e. Yuan. In this case, Pakistan has issued a bond with fixed interest rate for 3 years. If understood in simple language, Chinese investors will give money to Pakistan now and Pakistan will have to return this amount with interest after a stipulated time.

What benefit can Pakistan get from this?

Pakistan is trying to get funds in Yuan instead of Dollar, so that the pressure on foreign currency can be reduced a bit. Besides, efforts are also being made to increase confidence among Chinese investors. If Pakistan makes the payment on time, it can be a matter of relief for it. But if the economic situation does not improve, the debt burden may increase further in the future.

Has Pakistan taken foreign aid before?

In the last few months, Pakistan has been continuously taking financial help from different countries and organisations. Recently it had raised millions of dollars through Eurobonds. Apart from this, billions of dollars of deposits were received from Saudi Arabia and financial assistance was also received from IMF. Pakistan has also returned some of the money taken earlier to UAE.

Why did Pakistan's Finance Minister go on China tour?

Pakistan's Finance Minister Mohammad Aurangzeb had reached China to participate in this bond issuance program. It is believed that Pakistan will try to increase economic cooperation with China in the coming time, because at present its economy is still under pressure.