Key points
- Rice and cotton damage likely to trim GDP growth below target
- Finance minister sees growth still “north of 3.5%” despite heavy losses
- IMF loan tranche of $1.2 billion expected to support $407 billion economy
- Pakistan preparing first-ever yuan-denominated Panda bond by year-end
ISLAMABAD: Pakistan’s Finance Minister Muhammad Aurangzeb said the country’s economic growth will slow after devastating floods damaged key crops, though financial support from the IMF and the planned launch of Pakistan’s first yuan-denominated “Panda bond” are expected to help cushion the impact.
In an interview with Bloomberg News in Washington, Aurangzeb said that initial assessments show extensive damage to the rice and cotton crops, with detailed evaluations to follow in the coming months.
“This will put a dent in our GDP growth number,” he told Bloomberg, adding, “My own view is it will still be north of 3.5 per cent — early days, but anywhere between 3.5 to 4.”
Heavy monsoon rains since late June have devastated farmland, particularly in Punjab’s rice-growing belt. The flooding displaced over four million people and claimed about 900 lives. Before the disaster, the government had projected 4.2 per cent growth for the fiscal year ending June 2026.
“Climate change for us is not academic,” Aurangzeb said. “We are living it, and the recent floods actually are a reflection of that.”
Pakistan’s economy, valued at around $407 billion, has been stabilising after narrowly avoiding a sovereign-debt default two years ago. The finance minister confirmed Islamabad will soon receive nearly $1.2 billion in disbursements from the International Monetary Fund under a $7 billion loan program following a successful staff-level review.
The IMF projects GDP growth between 3.25 per cent and 3.5 per cent for the current fiscal year, despite flood damage. Inflation, the minister said, could rise beyond the upper limit of the government’s 5–7 per cent target range, easing from the record 38 per cent surge two years earlier.
Aurangzeb also noted progress in rebuilding Pakistan-US relations after years of strain, highlighting expanded trade ties and preferential tariffs — around 19 per cent on Pakistani goods compared with 50 per cent on Indian exports.
Panda bond planned
The minister revealed that Pakistan will issue its first tranche of yuan-denominated sovereign debt — known as Panda bonds — by late November or early December, worth about $250 million. The issue, he told Bloomberg, is aimed at diversifying funding sources.
“We have tapped the US-dollar market, we have done euros, we have done Islamic sukuk, but we had not accessed the second-largest, the second-deepest capital market in the world,” he said.
