Pakistan’s short-term local government bonds are set for their first annual inflow from foreign investors in five years, buoyed by high yields and a stable rupee in an improving macroeconomic environment.
According to the State Bank of Pakistan’s latest data from Monday, net overseas inflows into Treasury bills rose to $875 million in 2024. That’s a turnaround from four straight years of outflows totaling $1.4 billion.
Pakistan’s success in stabilizing its cash-strapped economy is bearing fruit, with investors more confident on its ability to pay debt, thanks largely to the International Monetary Fund’s support. The nation’s treasury bills yield about 16% to 17%, among the highest in Asia.
“Investors see a stable currency and high rates that are attracting them to Pakistan,” said Suleman Rafiq Maniya, an independent wealth manager in Karachi.
In a sign of the nation’s growing appeal, JPMorgan Chase & Co. led a group of foreign investors in a visit to the country last month. Finance Minister Muhammad Aurangzeb discussed fixed-income investment opportunities with the group, assuring them of the government’s support in facilitating their investment.
The nation’s foreign reserves have increased to the highest in more than two years after approval by the IMF for a new $7 billion loan package last month.
Pakistan’s other assets have performed as well. The benchmark stock index has risen 73% in the past 12 months, making it the world’s best performer. Dollar bonds have delivered returns of nearly 40% this year, according to data compiled by Bloomberg.
The treasury bills are still a decent investment option while the upside for government bonds is limited, Clifford Lau, portfolio manager at William Blair Investment Management wrote in a note last week after visiting Pakistan.
