Pakistan’s Foreign Investments Show Recovery Amid Profit On Securities and stability In Rupee-Dollar Rate
Foreign investments in government debt securities such as T-bills and Pakistan Investment Bonds (PIBs) are slowly surging.
This is amid a surge in the profit rate on securities, return of stability in rupee-dollar parity, and hopes of Islamabad resuming the International Monetary Fund’s (IMF) loan program soon.
Although the volume of net foreign investment in securities stood at a nominal level of $17 million in the first 20 days of March 2021, the number suggests a gradual return of foreign investment into Pakistan’s debt market.
Similarly, the net divestment has reduced to $83 million in the past nine months 9MFY21 compared to net divestment worth $162 million in 7MFY21.
The net divestment stood at $266 million in 5MFY21, according to the State Bank of Pakistan (SBP).
Government securities had witnessed an aggressive investment of over $3.5 billion from July 2019 following the IMF bailout package worth $6 billion until February 2020 when the Covid-19 pandemic reached Pakistan, delivering a hit to the value of the rupee against the dollar.
During the March to June period, there was an aggressive outflow of over $3 billion.
It is pertinent to note that the rate of profit on three-year PIBs has increased to 9.31% on the 22nd of March compared to 7.53% at the end of June 2020 in the secondary market.
Similarly, the five-year PIB profit rate surged to 9.84% compared to 8.11% at the end of June 2020.
Similarly, the return rate on three to 12-month T-bills and other longer tenure PIBs has surged sharply in recent months.
Meanwhile, the profit rates have also surged on the securities in the secondary market.
This is despite the real interest rate remaining negative as the central bank wanted to support economic growth during the ongoing pandemic.
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