Islamabad: Pakistan has formally requested China to increase its existing swap line by an additional 10 billion yuan ($1.4 billion), Finance Minister Muhammad Aurangzeb confirmed. He also revealed expectations that the country would issue a Panda bond before the year-end.
Currently, Pakistan holds a 30 billion yuan swap line with China, and in an interview with Reuters on the sidelines of the International Monetary Fund (IMF) and World Bank Group spring meetings in Washington, Aurangzeb explained the country’s desire to expand this amount.
“From our perspective, getting to 40 billion renminbi would be a good place to move towards … we just put in that request,” he said.
China’s central bank has been promoting currency swap agreements with various emerging economies, including Argentina and Sri Lanka, aiming to support these nations in stabilizing their financial systems and enhancing trade.
In addition to the swap line request, Pakistan has made significant strides toward issuing its inaugural Panda bond. These bonds are debt instruments issued in China’s domestic market and denominated in Chinese yuan. Talks with key officials, including the presidents of the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB)—the two organizations set to provide credit enhancements for the bond issuance—have been “constructive,” Aurangzeb said.
“We want to diversify our lending base and we have made some good progress around that. We are hoping that during this calendar year we can do an initial print,” he added.
Meanwhile, the IMF is expected to approve the Staff Level Agreement for Pakistan’s new $1.3 billion arrangement under a climate resilience loan program in early May. This approval will also mark the first review of the ongoing $7 billion bailout program Pakistan secured in 2024. The approval will trigger a $1 billion payout, a vital step in stabilizing Pakistan’s economy.
Addressing the economic impact of the tensions between India and Pakistan, which followed the recent attack that killed 26 people at a tourist site in Kashmir, Aurangzeb noted that the situation “was not going to be helpful.” The attack triggered widespread outrage and grief in India, leading to calls for punitive actions against Pakistan. India accuses Pakistan of supporting terrorism in the disputed Kashmir region, which both nations claim and have fought two wars over.
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In retaliation for the attack, both countries imposed several measures against each other, including Pakistan’s closure of its airspace to Indian airlines, suspension of trade ties, and India’s suspension of the 1960 Indus Waters Treaty, which governs the water-sharing arrangement between the countries. These actions have exacerbated tensions and resulted in a sharp decline in trade between the two countries, which totaled just $1.2 billion last year.
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Despite these challenges, Aurangzeb forecasts a growth rate of around 3% for the current financial year, which ends in June 2025, with a projected growth rate of 4-5% next year. He remains optimistic that Pakistan will hit a growth rate of 6% in the years following.
