Inflow of hot money begins slowly

Updated April 30, 2020

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Data shows that the government started witnessing inflows in the treasury bills, clocking in at $204m even though the figure was dwarfed by foreigners unloading $631m in the same month. — Reuters/File
Data shows that the government started witnessing inflows in the treasury bills, clocking in at $204m even though the figure was dwarfed by foreigners unloading $631m in the same month. — Reuters/File

KARACHI: While the outflow of foreign investment in the treasury bills still remains high, April also witnessed some uptick in hot money inflows.

Latest data issued by the State Bank on Wednesday noted a change in March’s trend of foreign investment from the T-bills when no hot money was recorded in the government papers.

It shows that the government started witnessing inflows in the treasury bills, clocking in at $204m even though the figure was dwarfed by foreigners unloading $631m in the same month.

The entire inflow in the treasury bills during the month came from the United Kingdom, offering over 13 per cent return. Even though the SBP has slashed the key policy rate by a total of 425 basis points to 9pc due to Covid-19, bankers said this is still much higher than in the UK, thus making the local debt instruments still fairly very attractive to the investors.

However, the Special Convertible Rupee Account data shows $49m foreign outflow from the T-bills on Tuesday alone.

Currency dealers said the interbank market which opened on Tuesday (due to Monday closure for Zakat deduction) attracted investors as the dollar was being sold at lower price.

Buying of the greenback increased the prices by Rs1.17 per dollar on Tuesday but dealers said the rupee depreciation was temporary.

The exchange rate remained almost the same on Wednesday as the dollar slipped by four paisas in the interbank market.

The State Bank data showed that the fiscal year-to-date outflow of dollars from the T-bills is $2.853bn, against a total inflow of $3.636bn — leaving a balance of $782m.

Published in Dawn, April 30th, 2020