Foreign outflows cross $700m in March: SBP

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KARACHI: Total gross divestment during March 2020 has reached $772.3 million, according to data released by the State Bank of Pakistan (SBP), as ‘hot money’ leaves the country amid ongoing concerns about the impact of the COVID-19 outbreak.

It is expected that by the end of this week, T-bills’ outflows from the Special Convertible Rupee Account (SCRA) will cross $800 million.

Foreign investors divested $166 million net worth of treasury bills (T-bills) on March 12, as per the SCRA, which tracks inflows and outflows from foreign countries.

The net investment in T-bills from July 2019 to date now amounts to $2.327 billion.

This has been an especially bad week in terms of divestment from T-bills. On March 11, foreign investors divested $251 million net worth of T-bills, with total divestment in March having reached $606.5 million.

Previously on March 10, foreign investors divested $136 million of T-bills on March 10.

This is part of a general pattern of divestment that started in late February. Foreign investors divested $67 million of T-bills on February 28 and divested $103 million net worth of T-Bills on March 3.

The divestment on March 3 was particularly significant, because it represented the first time there had been net selling in eight months.

According to analysts, the hot money outflows are likely to cause another round of rupee depreciation and is likely to cause another round of inflationary pressure. The large outflow of dollars is also concerning, as it means they will no longer act as a cushion for SBP reserves,

The outflows are connected to the ongoing oil war between Saudi Arabia and Russia due to the COVID-19 outbreak, that is typical not just for Pakistan, but also other emerging markets.

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