Foreign inflows in T-bills rise

Published November 18, 2020
Net foreign investment in the treasury bills as of Nov 16 amounted to $16 million reflective of growing confidence in government-backed securities. — AFP/File
Net foreign investment in the treasury bills as of Nov 16 amounted to $16 million reflective of growing confidence in government-backed securities. — AFP/File

KARACHI: Net foreign investment in the treasury bills as of Nov 16 amounted to $16 million reflective of growing confidence in government-backed securities, latest data released by the State Bank of Pakistan (SBP) showed on Tuesday.

In the FY20, the government and SBP had promoted T-bills to attract foreign investment. However, investors were allowed to take out the entire amount from the T-bills without any objection from the central bank.

Owing to lucrative rates and carry-trade opportunities, foreign investment in the T-bills during the 9MFY20 rose to $3.4 billion. However, foreign investors pulled out their investment in T-bills owing to the uncertainty caused by the Covid-19 pandemic in March earlier this year.

However, November witnessed a change in investment pattern as the inflows are so far higher than the outflows. According to the latest data issued by the SBP on Tuesday, total inflows in November (up to Nov 16) was $44.14m while the outflow was $28m; net inflow was $16m.

Financial sector experts believe the foreign investment in T-bills is a sign of returning confidence due to an improvement in major economic indicators of the country. While the current account is so far in surplus during the current financial year, the large scale manufacturing (LSM) posted over 7.6 per cent growth in September. During July-Sept, the LSM grew by 4.81pc compared to last fiscal year.

In 2019-20, the LSM growth fell by 10.17pc on a yearly basis.

The inflow of foreign investment in T-bills, also referred to as hot money, continued during the current fiscal year but the outflow was so far higher. The cumulative inflows during FY21 (July-Nov 16) were $171m against outflows of $463.7m.

A banker said that net inflows in November could be a sign of an increase in foreign investment, beginning the second phase of hot money inflows.

He said that higher outflow during the current fiscal year was also indicating that the remaining hot money investment has matured. Though, most of the investments left Pakistan in the wake of pandemic, hundreds of millions were still parked in the government securities. Bankers found it encouraging that the investment in T-bills continued during the current fiscal year.

It was also noted that some experts believed the sudden outflows in FY20 were not instigated by the pandemic but real reason was the SBP’s decision to cut interest rate by 2.25pc in March and then it was brought down to 7pc from 13.25pc. They said it created more uncertainty than the pandemic.

Published in Dawn, November 18th, 2020

Opinion

A decade of change & stagnation
Updated 20 Sep 2021

A decade of change & stagnation

Over a decade, three more women out of 100 aged between 19 and 39 have acquired college degrees, compared to only two more men.
All about life
Updated 20 Sep 2021

All about life

There is no shortage of issues on which the Single National Curriculum has stirred controversy.
‘Honourable men’
20 Sep 2021

‘Honourable men’

Is it ambition to support our athletes only after they bring us glory?
Concerns of proxy wars
Updated 19 Sep 2021

Concerns of proxy wars

A lobby in the US favours a plan for proxy warfare so that America can sustain its global influence.

Editorial

20 Sep 2021

Banking for women

AS the old adage goes, the proof of the pudding is in the eating. How far the new State Bank initiative —...
Off the red list
Updated 20 Sep 2021

Off the red list

There are aspects of coronavirus management, especially by developed nations towards those less so, that smack of discrimination.
20 Sep 2021

Exciting frontiers

HISTORY was made on Wednesday at the Kennedy Space Centre in Cape Canaveral. It was not the launch of the first, or...
Talking to the Taliban
Updated 19 Sep 2021

Talking to the Taliban

PRIME Minister Imran Khan has announced that he has started a dialogue with the Taliban for the formation of a...
New Zealand’s departure
Updated 19 Sep 2021

New Zealand’s departure

THERE was chaos and despair when New Zealand decided to call off their tour of Pakistan barely minutes before the...
19 Sep 2021

Crucial polio campaign

THE national vaccination campaign that kicked off in Khyber Pakhtunkhwa on Friday is being described by experts as...