T-bill outflows reach $2.6bn in 10 months  

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KARACHI: The cumulative net investment in T-bills from July 2019 to date is now well below $1 billion, standing at $841 million, according to data released by the State Bank of Pakistan (SBP).

Much of this divestment impact has to do with the trend of foreign outflows leaving the country that has continued unabated since late February 2020. In total, foreigners have now divested $2.6 billion worth of T-bills since July 2019.

Foreign investors divested $85 million worth of treasury bills (T-bills) on April 15, as per the Special Convertible Rupee Account (SCRA), which tracks inflows and outflows from foreign countries.

The total gross divestment during March 2020 stood at $1.735 billion, while gross divestment in April 2020 so far has reached $550 million.

Previously, foreign investors $54 million worth of T-bills on April 13; divested $82 million worth of T-bills on April 8; divested $73 million worth of T-bills on April 6; and divested $48 million worth of T-bills on April 1.

Just two days ago, the cumulative net investment had stood at $951 million. This was the first time the cumulative net investment since July had stood at less than $1 billion since October 2019, when it stood at $441 million.

In fact, the preceding eight months had seen positive inflows of varying amounts. Cumulative net investment in T-bills comfortably climbed from $15 million in July 2019 to $3.099 billion in February 2020.

But in March, 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.

The flight of money occurred even while the SBP was maintaining a generally high policy rate, at 13.25pc. But then 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.

Then on April 16, the SBP decided to cut the interest rate for a third time, by 200 basis points from 11pc to 9pc. This drastic reduction in the policy rate is expected to further exacerbate foreign outflows.

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