Foreign investors pull $135.5mn from T-bills amid interest rate decline, PKR depreciation

Foreign investors have pulled a net $135.5 million from Pakistan’s treasury bills as of March 14, 2025, driven by a significant decline in interest rates and early signs of rupee depreciation, according to data from the State Bank of Pakistan (SBP). 

The outflow reflects a shift in investor sentiment, following a period of considerable inflows earlier in the fiscal year.

Foreign investments in T-bills amounted to $16.636 million, while withdrawals totaled $152.108 million, leaving a net outflow. 

Between July 1, 2024, and March 14, 2025, total investments in T-bills reached $1.163 billion, with $1.121 billion sold, resulting in a modest net inflow of $42 million.

Analysts noted that the significant outflows in recent months, including $156.1 million in December 2024, $48.9 million in January 2025, and $135.5 million by mid-March, reflect a shift in investor behavior after a period of strong inflows, particularly in the first half of 2024. They said that this reversal is likely due to profit-taking by foreign investors who had accumulated positions during peak inflows, especially in May 2024 when $229.6 million was invested.

The decline in interest rates by 10 percentage points and the early signs of rupee depreciation have made T-bills less attractive, prompting a risk-averse stance among investors. Although there was a brief rebound in February 2025 with $46.9 million in inflows, the subsequent outflow in March suggests that sentiment remains cautious.

Analysts believe that investor flows will depend on the trajectory of the Pakistani rupee, expectations surrounding interest rates, and broader macroeconomic stability. They expect the SBP to keep interest rates unchanged for the foreseeable future, with potential rate cuts expected in the latter half of 2025.