Pakistan secures $285m guarantees for Panda bond

• ADB, AIIB to back $250m green bond for hospitals, power and water schemes
• CDWP clears projects worth Rs236bn

ISLAMABAD: Pakistan has secured formal assurances from the Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) for $285 million in guarantees to back its inaugural issue of Chinese Panda Bonds — aimed at raising around $250 million (equivalent in Renminbi) to finance two major hospitals in Islamabad, a national telemetry system, and upgrades to the power distribution network.

The plan is part of a broader initiative to raise $1bn equivalent through Panda Bonds, and the proposal came under discussion during a meeting of the Central Development Working Party (CDWP) for clearance of the required guarantees from AAA-rated multilaterals, given Pakistan’s sub-investment-grade sovereign credit rating.

Presided over by Planning Minister Ahsan Iqbal, the CDWP meeting approved the guarantees and also cleared seven development projects worth a total of Rs236bn. Of these, three smaller projects with a combined cost of about Rs8bn were approved, while four larger schemes worth Rs228bn were recommended for approval to the Executive Committee of the National Economic Council (Ecnec).

The meeting was informed that the $250m Panda Bonds are planned for launch in the Chinese Interbank Bond Market before December 2025, pending internal and regulatory clearances in both countries. The ADB will provide a guarantee of up to $160m, while the AIIB will cover $125m, to back the principal and unpaid interest obligations of the bonds, offering 95pc indemnity. These credit enhancements are required to secure a domestic AAA rating in China, enabling the bonds to qualify as investment-grade instruments.

The three-year fixed-rate bond, denominated in Chinese currency, will be offered to qualified institutional investors, with an indicative coupon range of 3-4pc per annum. The transaction is being managed by a consortium of China International Capital Corporation and Habib Bank Ltd.

The ADB will charge an annual guarantee fee of 50 basis points (bps), a commitment fee of 15bps, and a 25bps upfront fee. AIIB’s terms include a 50bps annual fee and a one-time upfront charge of 75bps. The guarantees are conditional on the bond proceeds being used exclusively for sustainable and green projects.

Of the proceeds, $76m will be allocated to the Jinnah Medical Complex and Research Centre, $27m for equipment procurement for a cancer hospital in Islamabad, $76.5m for a telemetry system to monitor discharge stations along the Indus River, and $71m for strengthening the power distribution networks of the Lahore, Sukkur, and Multan electric supply companies.

Among the smaller projects approved by the CDWP was Rs1.38bn for technical assistance under the Action to Strengthen Performance for Inclusive and Responsive Education Programme. Another was the revised Rs1.85bn “Establishment of National Centre for Brand Development” to promote national branding and assist SMEs. The third, a transport sector project — construction of an eight-lane overhead bridge at Imamia Colony Railway Crossing Shahdara (N-5) — was approved for Rs4.67bn.

The planning minister directed the transparent implementation of the education sector technical assistance and called for a report on measurable outcomes. He also ordered a comprehensive review of all foreign-funded education projects undertaken over the past decade, citing concerns over the lack of visible impact despite substantial borrowing.

Among the larger projects referred to Ecnec was the “Estab­lishment of Nawaz Sharif Institute of Cancer Treatment and Research, Lahore” for Rs74.92bn. Funded by the Punjab government, the two-phase project includes a 280-bed tertiary hospital, a cancer care clinic, a hospice and palliative care facility, a bone marrow transplant centre, residential accommodation for international consultants, and supporting infrastructure. Phase II will add another 300-bed block and a multi-level parking plaza.

The CDWP also recommended for approval the long-delayed 34.5MW Harpo Hydropower Project in Gilgit-Baltistan, estimated to cost Rs34.34bn and fully financed by European donors. The minister directed the Economic Affairs Division to avoid entering into new foreign loan agreements unless the Ministry of Finance guarantees rupee cover in the Public Sector Development Programme (PSDP). He warned that without rupee backing, the growing number of stalled projects could lead to another circular debt crisis.

Another scheme referred to Ecnec was the Rs68.74bn project for “Land Acquisition, Affected Properties Compensation, and Relocation of Utilities” for the 959km Karachi-Lahore Motorway. It involves acquiring 25,925 acres — 23,975 acres for the motorway and 1,950 acres for interchanges and service areas.

The CDWP also cleared the Rs49.9bn Balochistan Water Resources Development Sector Project (BWRDSP) for the Zhob and Mula river basins. The project will be financed through an ADB loan of $148m (78.99pc), an ADB grant of $5m (2.67pc), and a government contribution of $34.37m (18.34pc).

Published in Brackly News, September 12th, 2025