Pakistan eyes access to Chinese capital markets: Aurangzeb

Finance Minister Muhammad Aurangzeb said that Pakistan was keen to access Chinese capital markets as Islamabad seeks to raise finances from international avenues.

The remarks came on Wednesday while addressing the Pak-China Business Forum being held in Shenzhen.

“During the next fiscal year, we want to go in with Pakistan’s inaugural Panda bond issue to access the Chinese capital market which is the second largest and deepest market in the world,” said Aurangzeb.

“At our end, we are in the preparatory stages. We are going to be in touch with the regulatory authorities in China because this is going to follow a structure followed by the Government of Egypt, which is going to be a guarantee-back structure in terms of the inaugural Panda bond in this market,” he said.

He added that he expects the policy rate to decline this year on the back of a significant decline in the inflation rate, which has come down from a peak of 38% to a little over 11% in May.

“It has beaten the market consensus,” said Aurangzeb, adding that not only core inflation but also food inflation is declining.

Pakistan’s headline inflation clocked in at 11.8% on a year-on-year basis in May, the Pakistan Bureau of Statistics (PBS) said on Monday, much lower than the reading in April when it stood at 17.3%.

“While this is very much in the domain of the central bank, we do expect that the policy rate will start moving down in line with inflation, because we now have enough cushion in terms of the positive real interest rate that we need to maintain.

“So the interest rate regime in Pakistan, which has been an issue for a while, we should start seeing some relief on that front during the course of this calendar year,” he said.

In his address, Aurangzeb admitted that “with respect to our Chinese partners and investors there have been some temporary hiccups, in terms of delays in payments, repatriation”.

“I want to assure you that these were not structural in nature. As we go forward we are there to help support, assist any way we can,” he said.

The finance minister reiterated that all macroeconomic indicators of Pakistan are moving in the right direction. “The agriculture GDP growth during this fiscal year of 6.25% is a real bright spot,” he said.

“On the fiscal side, we have a primary surplus, due to both fiscal consolidation and fiscal discipline.

“On the current account side, remittances have held ground and the exports have moved up not only in terms of traditional sectors of textile but agriculture, on the back of bumper crops, and Information Technology,” he added.

He said that the country’s current account deficit is going to be less than a billion dollars this fiscal year.

He said that Pakistan is in talks with the International Monetary Fund (IMF) for a longer and larger programme, which is crucial to ensure permanence in microeconomic stability and to execute the structural changes.