Hot money getting hotter in Pakistan: T-bills stood at $327 million in Sep

A prominent start, Reza Baqir’s policy seems to be yielding results.

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  • The amount received so far in portfolio investment is nothing as compared to the potential.
  • “Pakistan debt market is huge – only the marketable securities are of Rs9 trillion ($57 bn)”: SBP Governor

Hot Money

Governor of State Bank of Pakistan Reza Baqir is satisfied with the promising beginning of the hot money policy introduced by him.

Hot money is getting hotter in Pakistan. An unparalleled level of $234 million in Sep-19, the year to date inflows under SACRA in government papers (T-Bills only) stood at $327 million in Sep-19. At this pace, the yearly flow could be worth $2 billion.

While talking to the source Reza said that the amount that has been received so far is nothing as compared to its capacity.

Not concerned with terminology hot

He further added, “I am not concerned with the hot terminology being used with the investment portfolio.

“Pakistan debt market is huge – only the marketable securities are of Rs9 trillion ($57 bn). Foreign investors like big deep markets so they can enter and leave without moving the market”, said the Governor.

Further, he added he is directing this to the investors and so far, $326 million has been generated from the US.

“Our government debt market has a lot of scattered bond issues along the curve. Liability management operations that create deep pockets along the curve would also help to deepen the markets. By doing so, we can provide a good funding base for the provision of long-term finance to the private sector. Right now, long-term finance is not that easy to get. Banks are primarily interested in government bonds”, pointed Baqir.

Before the building of the reserves, the currency will remain under pressure. The reserve building is dependent on portfolio investment and other elements.

For sustained currency and interest rates coming down, a huge amount of money must come in less time.

Forget the temperature let the money come in says the Governor.

Hot Money

Hot money refers to funds, which are customarily transferred between financial institutions to increase interest or capital gain. Investors who seek short-term returns control these funds. A typical short-term investment opportunity that often attracts “hot money” is the certificate of deposit (CD).

T-bills

The government of Pakistan issued treasury bills that are zero-coupon instruments and with the help of fortnightly auctions are sold through the state bank of Pakistan. T-Bills are risk-free and are issued for 3-months, 6-months, and 1-year. Furthermore, they are priced at the discount.


Also See: CEO Ideagist Talks About The Motivation And Vision Behind $100m Investment In Pakistan


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