Pakistan receives $1 billion as high interest rates attract foreign investors

As per Dr. Abdul Hafeez Shaikh, Finance Adviser, the foreign investors have bought over $1 billion worth of Pakistan’s debt, he revealed this information on Monday.

Central Bank’s data shows that the money was invested in three-month treasury bills, stating that the foreign investors weren’t ready for a big risk that might be associated with the exchange rate fluctuations.

$1 billion has been invested by foreign investors in government securities, according to the financial adviser while talking at the Pakistan Innovative Finance Forum, which Asian Development Bank (ADB) arranged and Karandaaz Pakistan.

SBP (State Bank of Pakistan) governor was following the policy of attracting risky foreign money so that the country’s foreign currency reserves could increase. To succeed in this goal, he got tax concessions approved by the federal government.

Withholding tax has been cut by the government from 30% to 10% for non-resident companies having no permanent business in the country, being charged on the profit which was made on securities disposal. The protocol has been given to these investors due to their investment in the national treasury bills and PIBs (Pakistan Investment Board), acquired through Special Convertible Rupee Account.

Central Bank showed that up till now, %1.1 billion had been invested in the treasury bills and PIBs. The investment in PIBs amounted to $3.2 million only. But, in November alone, Pakistan received $630 million worth of foreign investment in government debt.

Out of this $1.1 billion, $612.7 million was received by the country from the United States, $466.4 million from the United Kingdom, $5.1 million from the United Arab Emirates, $496,000 from the Cayman Islands and $363,000 from Ireland.

Even though the foreign investment in debt securities has provided temporary relief for the government, it also puts additional pressure on the foreign currency reserves, if the investors pull out their money.

Shaikh stated that the central bank made decisions on the exchange rate and monetary policy on its own. Hammad Azhar, Federal Minister for Economic Affairs, said that last week, the repayment of short-term loans increased the government’s debt repayments.