Pakistan to Launch First Panda Bond with ADB and AIIB Credit Guarantee

September 10, 2025 (MLN): The Government of Pakistan is preparing to issue its inaugural Panda Bond worth USD 250 million equivalent in Chinese Renminbi (RMB), marking a significant step toward diversifying its funding sources and strengthening financial ties with China. The issuance will be supported by partial guarantees from the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).

The bond will be placed privately on China’s Interbank Bond Market and offered exclusively to qualified institutional investors. Structured with a fixed-rate coupon and a 3-year maturity, the bond is expected to carry an interest rate in the range of 3-4% per annum. This is the first tranche of a broader USD 1 billion Panda Bond program approved by Pakistan.

The issuance is being coordinated with support from a consortium of financial advisors and underwriters, including China International Capital Corporation and Habib Bank Limited. It is targeted for completion before December 2025, pending final regulatory approvals in both countries.

Credit Guarantee to Secure AAA Rating

Due to Pakistan’s sub-investment-grade credit rating, a credit enhancement mechanism is required to access China's investment-grade-only bond market. To achieve a domestic AAA rating in China, ADB and AIIB will provide a pari passu, pro rata-based co-guarantee, jointly covering up to 95% of the bond’s principal and any accrued but unpaid interest.

The maximum guarantee amount is capped at USD 285 million (equivalent in RMB). ADB will guarantee up to USD 160 million, while AIIB will cover up to USD 125 million. The guarantees will be extended directly to bondholders in line with Chinese regulatory standards.

Fee Structures

ADB’s indicative guarantee fee structure includes:

• An annual guarantee fee of 50 basis points (bps)
• A commitment fee of 15 bps
• An upfront fee of 25 bps

AIIB’s fee structure includes:

• An annual guarantee fee of 50 bps
• A one-time processing fee of up to 50 bps
• A one-time upfront fee of 25 bps

These guarantees aim to enhance investor confidence and broaden Pakistan’s access to international capital markets, particularly in Asia.