KARACHI: Rupee-dominated T-bills continue to be a magnet for foreign investors as the bonds attracted a net investment of $57 million in June 2024, according to data by the State Bank of Pakistan (SBP).
This brings the total foreign investment in T-bills through Special Convertible Rupee Accounts (SCRAs) to $444 million during the period July 2023 to June 7, 2024, the data shows. In the month of May 2024 alone, Pakistan attracted $230 million, which is the highest monthly inflows after four years.
In his conversation with The News, macroeconomist Ammar Habib Khan says, “due to higher interest rates and the lower expected depreciation of PKR, there has been some movement of US dollars into Pakistan, with investors investing in our local treasury bills.”
Per Ammar, this “basically means that we have a positive real interest rate, which is why dollars can find more returns here.”The SBP had maintained its benchmark interest rate at 22 per cent since June 2023. The SBP reduced its key interest rate by 150 bps to 20.5 percent on June 10. This reduction came after keeping the rates at a historically high 22 per cent to rein in rapidly rising inflation.
Political instability in Pakistan in 2022 dented the country’s economy with the Pakistani rupee becoming the first casualty. The country was on the brink of default and the currency fluctuated heavily. On September 5, the rupee fell to a record low of 307.1 versus the dollar. This volatility kept investors away from the Pakistan market.
But the government was quick to act. Last summer, Pakistan secured a $3 billion bailout from the IMF to prevent a sovereign default, which ended in April this year.
The Pakistani rupee rose by 2.8 percent versus the US dollar in the outgoing fiscal year 2024. Analysts attribute this positive performance to the government’s successful completion of the International Monetary Fund’s loan programme and its efforts to crack down on illegal dollar transactions.
In its note on Monday, Karachi-based brokerage house Topline Securities added, “To recall in FY20 net T-bills inflows of $612 million came to Pakistan with a peak seen in the month of January 2020 with the net monthly inflows of $1.4 billion.”
“We believe, once Pakistan gets the new long-term IMF deal, chances are high that more of such funds will come to Pakistan to get high yielding government papers, thereby providing short-term support to Pakistan’s foreign exchange reserves and currency,” the note added.