New Delhi, May 21 (IANS) Pakistan’s move to explore Panda bonds has raised concerns over deepening financial dependence on China, even as Islamabad seeks alternative financing channels to manage persistent external sector pressures, a report has said.

According to a report by Pakistan Today, the yuan-denominated debt instrument — issued in China’s domestic bond market — is being viewed in Islamabad as a way to diversify funding sources beyond traditional Western lenders and multilateral institutions.

However, the development is being seen as reinforcing Pakistan’s growing reliance on Chinese financial systems, it said.

Pakistan continues to face recurring balance-of-payments pressures driven by heavy debt servicing, import dependence and weak export growth.

However, China is already its largest bilateral creditor, with total exposure estimated at over $25 billion, including commercial loans, deposits and energy-sector liabilities.

In addition, the proposed Panda bonds add to an expanding network of financial linkages between the two countries, including currency swap arrangements between the State Bank of Pakistan and the People’s Bank of China, as well as rising yuan-based trade settlements, according to the report.

The report further highlighted that while these mechanisms provide short-term liquidity support and help ease immediate pressure on foreign exchange reserves, they deepen structural financial interdependence.

Pakistan continues to engage with multiple external lenders, including the International Monetary Fund and the World Bank, but its growing tilt toward China highlights a narrowing set of financing options amid sustained macroeconomic vulnerability and limited export diversification.

According to the report, the Panda bond development is therefore being viewed not just as a financing tool, but as part of a broader trend of deeper economic integration with China, one that carries both short-term relief and longer-term concentration risks.

–IANS

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