KARACHI: Foreign investors sold $16 million worth of treasury bills (T-bills) on May 21, according to the latest data from the State Bank of Pakistan (SBP, bringing the net divestment figure of May so far to $182 million.
As per the Special Convertible Rupee Account (SCRA), which tracks inflows and outflows from foreign countries, this latest development now nudges the cumulative net investment in T-bills from July 2019 to May 21, significantly below $1 billion, at $581 million.
This is roughly comparable to the cumulative net investment level in T-bills in October 2019, when it stood at $441 million.
The preceding eight months had seen positive inflows of varying amounts, which were attributed to the SBP maintaining a generally high policy rate, at 13.25pc. Typically, foreign inflows or ‘hot money’ is associated with higher interest rates. Cumulative net investment in T-bills comfortably climbed from $15 million in July 2019 to $3.099 billion in February 2020.
But then in the space of one month, beginning March 17, the SBP cut the policy rate by 425 basis points on three different occasions, to 9pc. The decisions were taken to create a more favourable business climate in light of the global COVID-19 pandemic.
The total gross divestment in March 2020 stood at a whopping $1.735 billion, while April’s net divestment figure stood at $601 million.
The net divestment figure of May so far is recorded at $182 million, which is a far cry from the divestment figures of the preceding months. It remains to be seen what the final divestment figure for May will be.