Foreign investments in Pakistan’s treasury bills (T-bills) saw a sharp decline as outflows exceeded inflows by four times during the first week of November.
According to data released by the State Bank of Pakistan (SBP) on Thursday, foreign investors withdrew $46 million from T-bills, against inflows of only $10.5 million during this period. This shows a significant loss of interest in domestic bonds.
Some analysts attributed the withdrawals to falling returns on domestic bonds as the main reason, which made the domestic bonds less attractive to foreign investors. Others pointed to the country’s uncertain political climate as a deterrent, with ongoing unrest in Islamabad reinforcing concerns. The capital is once again being cordoned off to prevent protests from escalating.
A closer look at the data revealed inflows of $5.3 million from the UK, $5 million from the UAE, and $0.26 million from the US between November 1 and 8. However, the week’s substantial outflows, including $41 million from the UK and $5 million from the UAE, overturned the balance sheet.
“News of apparent unwillingness of debt rollovers by friendly countries like China, Saudi Arabia, and the UAE cast doubt over Pakistan’s abilities to attract any FDI or Foreign investment flow in the bond market as usually when these decisions are delayed, chances of dollar appreciation increases which results in loss to investors,” said Rashid Masood Alam, a senior banker to Dawn.
Since the fiscal year began on July 1, Pakistan has received $717.7 million in foreign investments in T-bills while witnessing $417 million in outflows.
On Thursday, the SBP announced that its foreign exchange reserves increased by $29 million bringing the total to $11.29 billion as of November 15. The country’s overall reserves stand at $15.96 billion, including $4.67 billion held by commercial banks.
