Middle East conflict halts Gulf investment in Pakistan’s T-bills

Foreign investment in Pakistan’s treasury bills slowed sharply in early March, with total inflows reaching only $9 million by March 6 — all from the United Kingdom — while investments from Gulf countries halted and outflows reached $78 million during the first six days of the month, according to data released by the State Bank of Pakistan (SBP).

Before the escalation in the Middle East, the United Arab Emirates and Bahrain were among the major investors in Pakistan’s treasury bills, which offer returns of up to about 11 percent.

SBP data indicates that the UAE had previously invested around $267 million in T-bills but has not made further investments since the regional conflict intensified. Bahrain has also stopped fresh purchases after earlier investments of about $187.5 million in the government securities.

Foreign investment in T-bills has been an important source of inflows for Pakistan, helping support foreign exchange reserves and stabilise the exchange rate.

Apart from Gulf countries, other investors in Pakistan’s treasury bills over the past eight months included the United Kingdom with $220 million, Singapore with $77 million and Australia with $34 million.

Analysts say the regional conflict has altered investor sentiment, and inflows from the Middle East may remain limited in the near term as global markets react to geopolitical developments.

Economists also note that rising oil prices could increase inflationary pressures. If inflation accelerates, the State Bank of Pakistan may face pressure to raise interest rates, which could push treasury bill yields higher.