From Zero to Hero: Global investors are piling into Pakistan’s local-economy bonds like never before-Bloomberg
Foreigners buy $342 million of local debt in July-September as compared to zero inflows in the last two years.
- Under a new governor, Reza Baqir, Pakistan is looking to sustain the economy and control currency devaluation
- “People are looking at Pakistan as they see a story similar to the one in Egypt, and people made good money”-Bloomberg’s report
From zero to hero- Pakistan’s efforts to introduce economic reforms have finally paid off.
According to the report published by Bloomberg, while having support from IMF (International Monetary Funds) and 13% interest topping rates have attracted Pakistan’s fixed-income, whereas the country is in the middle of huge debt.
According to the report published in 2015 by the State Bank of Pakistan, foreigners have bought $342 million of local debt from July to September this year, whereas there were zero inflows in the last two years.
Bloomberg’s report said, “People are looking at Pakistan as they see a story similar to the one in Egypt, and people made good money there,” said Tim Ash, a strategist at BlueBay Asset Management in London. “The assumption is the currency adjusts, rates go higher and this creates good valuations on bonds to put money to work.”
Connection with Egypt
After the appointment of Reza Baqir as Governor of State Bank of Pakistan, the collation with the North African nation increased.
Under a new governor, Reza Baqir, Pakistan is looking to sustain the economy and control currency devaluation. Since November 2017, Pakistan has been suffering from a deficit blowout and an unstable economy. The rupee has fallen almost 50% against the price of a dollar, the worst-performing currency of the world.
“The question is whether the rupee is now at the right level and are rates high enough to make up for forex risks,” said Ash. “Rates in Pakistan are lower than was the case in either Egypt or Ukraine when portfolio flows first began to come in. So, inflows in Pakistan will be more moderate.”
“The change in Pakistan is a reflection of the new finance minister and the state-bank governor, and the government’s general positive intent to engage with international investors,” said Andrew Brudenell, a U.K.-based fund manager at Ashmore Group Plc. “This bodes well, as long as the macro-economic picture can improve.”
Also See: Reforms Introduced To Address Economic Instability Have Started To Bear Fruit- SBP Governor
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