Foreign outflows reach $292m in April

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KARACHI: Total gross divestment during April 2020 has reached $292 million, according to data released by the State Bank of Pakistan (SBP), in an expected trend of foreign outflows leaving the country that has continued unabated since late February 2020.

Foreign investors divested $82 million of treasury bills (T-bills) on April 8, as per the Special Convertible Rupee Account (SCRA), which tracks inflows and outflows from foreign countries.

Previously, foreign investors divested $73 million worth of T-bills on April 6. And on April 1, foreign investors divested $48 million worth of T-bills.

The net investment in T-bills from July 2019 to date now amounts to $1.072 billion.

The previous month of March had seen a significant amount of money leave the country. Total gross divestment during March 2020 reached $1.735 billion, which stood in sharp contrast to the net gross investment of $236 million in February.

The preceding eight months had seen positive inflows of varying amounts. Notable months include November 2019, which saw a monthly net investment in T-bills of $713 million, and January 2020, which recorded a monthly net investment of $1.413 billion.

That came to an end in March, where foreign outflows, or ‘hot money’ began to leave the country just as quickly as they had poured in, mostly due to investor worry about the COVID-19 outbreak.

The cumulative net investment in T-bills from July 2019 to March plummeted to $1.364 billion, after comfortably reaching $3.099 billion in February.

Some analysts have said that the lower policy rate resulted in hot money leaving the economy. The SBP cut the policy rate by 75 basis points to 12.5pc on March 17, and then just one week later on March 24, by 150 basis points, from 12.5pc to 11pc.

However, the State Bank of Pakistan has maintained that there has been a general ‘flight to safety’ due to the COVID-19 pandemic, that is not linked to whether the SBP significantly changed its policy rate or not.

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