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T-bills fetch higher foreign investment after 17 months

By Shahid Iqbal 2021-09-05
KARACHI: The inflows of foreign investment in the short-term treasury bills surpassed the outflows during July-August FY22 for the first time since emergence of the Covid19 pandemic in March last year in the country.

According to the latest data of the State Bank of Pakistan (SBP), the foreign investment during the first two months of the current financial year reached $99.6 million compared to $93.76m outflows during the same period of last year.

Experts termed it a sign of restoration of confidence of foreign investors in the domestic bonds.

After emergence of the Covid-19 pandemic in Pakistan about 17 months ago, the foreign investors lef t the market so quickly that almost $3.5 billion flew out within two-three months despite the fact that the rate was highest around 13 per cent, while no developing or emerging market was offering such a high rate.

Currently the short-term t-bills offer around 6.5pc per annum, stillattractive compared to other competitive markets. The data shows that the inflow in t-bills in August was $36m while the outflow was $25m.

The major change was noted in June FY21 as the country attracted $93.5m t-bills against the outflow of $40.1m. This big inflow neutralised the impact of huge outflow from equity as it was $136.8m compared to inflow of just $48m in the last month of the outgoing financial year.

The inflow in June was $163.4m against the outflow of $150.8m. July and August of FY22 witnessed the same trend of higher inflows in t-bills and Pakistan Investment Bonds (PIBs).

The foreign investment in PIBs recorded a cumulative net inflow of $256m in FY21. The inflows in equities and t-bills were less than the outflows.

The PIBs got higher investment due to attractive returns. The 10-year PIBs offered 9.84pc return in the auction held on June 9, FY21.

During the same financial year, the inflows in PIBs were $277.5m with the outflows of $21.5m, while the cumulative net inflow was $256m.

The inflows in t-bills in FY21 were $688m, while the outflows were $890m. The net outflows were $202m.

The total net inflows of PIBs, t-bills and equities in FY21 were $1,647m compared to outflows of $2,013m.The year witnessed a net outflow of $366.6m.

However, FY22 showed a better picture with higher inflows in t-bills and PIBs compared to outflows; only inflows in equity were lower than outflows.

The inflows in PIBs in July-August this year were $17.3m compared to outflows of $8.8m. The inflow in equity was $63.54m against an outflow of $107m.

The cumulative inflows of t-bills, PIBs and equity during the first two months of FY22 were $180.4m compared to an outflow of $209.8m.

The government, in coordination with the SBP, is trying hard to attract foreign inflows by providing various financial services to non-resident Pakistanis (NRPs).

Recently, Prime Minister Imran Khan launched a financing scheme as `Roshan Ghar` which allows the NRPs to buy home in Pakistan.

Earlier, the Roshan Digital Account was introduced for the banking and financing in the country which has so far attracted over $2bn.

Along with these attractions, record remittances are helping the country bring down the current account deficit, but a sharp rise in trade deficit appeared to jeopardise the entire efforts. The trade deficit in July-Aug FY22 was over $7bn.