Pakistan asks China for extra $1.4 billion swap line, plans Panda bond launch

Pakistan has asked China for an extra 10 billion yuan—around $1.4 billion—on top of its current swap line, Finance Minister Muhammad Aurangzeb said, according to Reuters.

Speaking during the International Monetary Fund and World Bank Group spring meetings in Washington, Muhammad confirmed that Pakistan already holds a 30 billion yuan currency swap with China but now wants to boost it to 40 billion yuan.

“From our perspective, getting to 40 billion renminbi would be a good place to move towards… we just put in that request,” Muhammad said. The swap expansion request ties into Pakistan’s urgent need to keep access to foreign currencies stable while strengthening its financial reserves.

Besides pushing for a larger swap deal, Muhammad said Pakistan is getting close to launching its first-ever Panda bond, which is debt issued in China’s domestic market and denominated in yuan.

Talks have been underway with the heads of the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB) to secure credit enhancements for the bond issuance.

Muhammad said discussions with both banks have been “constructive” and added, “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.”

Pakistan pushes for more support while managing new tensions

China has been pushing swap agreements with several emerging economies, including Argentina and Sri Lanka, and now Pakistan is trying to extend its arrangement to keep up with growing financial needs. Muhammad said the plan to issue the Panda bond fits into Pakistan’s broader strategy to tap new markets and avoid overreliance on traditional lenders.

On the international aid front, Muhammad said he expects the IMF executive board to approve Pakistan’s new $1.3 billion deal under a climate resilience loan program in early May. This approval will also cover the first review of the country’s existing $7 billion bailout package.

Once the IMF board signs off, Pakistan will immediately unlock a $1 billion payout, a vital piece of the financial plan Pakistan secured in 2024 to prevent a full-blown economic collapse.

Asked about the effects of escalating tensions with India, Muhammad said it would be “not helpful” for Pakistan’s economic outlook. Earlier this month, after the killing of 26 men at a tourist site, both countries retaliated. Pakistan shut its airspace to Indian airlines and froze trade ties.

India responded by suspending the 1960 Indus Waters Treaty, which controls how water from the Indus River system is shared. Muhammad pointed out that even before the latest dispute, trade between the two countries had already shrunk massively, totaling just $1.2 billion last year.

Turning back to the domestic economy, Muhammad forecasted that Pakistan would hit about 3% growth for the financial year ending in June 2025. He said the country is aiming for growth of 4-5% the following year, with longer-term hopes of reaching 6%.

He emphasized that expanding financial sources like the Panda bond, enlarging the swap line, and securing IMF funds are all pieces needed to hit those targets.

Meanwhile, amid Pakistan’s strengthening relationship with China, US Treasury Secretary Scott Bessent met with Asian Development Bank President Masato Kanda on Friday. Bessent pressed Kanda to start moving China toward “graduation” from ADB borrowing, arguing that China’s economy no longer needs the same level of development bank assistance.

The Treasury Department said Bessent also pushed Kanda to focus on “best value” procurement practices and pointed out the need for an “all-of-the-above energy strategy,” including financing options for civilian nuclear power projects.

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