Foreign investors return to Pakistan Investment Bonds with $240m

Published April 1, 2021
The latest data issued by the State Bank of Pakistan on Wednesday showed that the foreign investors invested $240.69m in the PIBs during July-March FY21. — AFP/File
The latest data issued by the State Bank of Pakistan on Wednesday showed that the foreign investors invested $240.69m in the PIBs during July-March FY21. — AFP/File

KARACHI: Pakistan Investment Bonds (PIBs) attracted highest foreign investment of over $100 million in March alone, reflecting rising attraction for foreign investors keen to profit from returns up to 10 per cent.

The latest data issued by the State Bank of Pakistan on Wednesday showed that the foreign investors invested $240.69m in the PIBs during July-March FY21.

Bankers recalled how investments in PIBs and treasury bills (up to $3.5 billion) flew out quickly within three months once the Covid-19 pandemic made it to Pakistan last year.

The coronavirus cases have been rising since last month and the government has imposed smart lockdowns in many areas but kept trade and industries open. The inflows in PIBs reflect that the investors are not scared about the worsening pandemic in the country.

The PIBs attracted $103.09m in March which was the single highest inflow during the current fiscal year. The PIBs attracted $37.6m in February this year.

For the bankers, the rising inflow in the PIBs is a reflection of improved confidence in Pakistan economy, particularly the current account surplus that provided additional support to their confidence.

However, some bankers said that the return of up to 10 per cent on PIBs was the biggest attraction as nowhere in the world such high returns were available backed by sovereign guarantee.

The confidence in Pakistan is also reflected in the latest offer by the country through Eurobonds. The Eurobonds received bids worth $5.3bn and the government raised $2.5bn. The yields on 5-year, 10-year and 30-year bonds were six per cent, 7.375pc and 8.875pc, respectively.

The details of PIBs show that the highest amount of $115.2m was invested from the United States during July-March FY21. Investments from the US in March alone amounted to $23.65m. The returns on PIBs are much higher than the prevailing interest rates being offered in the US.

The United States has lowered its interest rates by one percentage point, from 1pc to an annual rate of 0pc. The US Federal Reserve lowered the rate to almost 0pc on March 15, 2020 with a goal to boost the economy which has been impacted by the pandemic.

On Jan 27, 2021, the US Federal Reserve maintained its target for the federal funds rate at a range of 0pc to 0.25pc.

European countries are paying a high price of Covid-19 which has badly hit their economies. The investors from there have been looking for higher returns like those offered by the PIBs.

The second highest inflow was noted from Luxembourg. The investment from the country in the PIBs amounted to $77.32m in March alone while its total investment reached $91.9m during the nine months of FY21 (9MFY21).

Investments from the Philippines and England amounted to $21.45m and $10.5m, respectively, during the 9MFY21.

The financial sector believes that high inflows due to borrowing from the International Monetary Fund, World Bank and Asian Development Bank and raising $2.5bn from Eurobonds would increase the foreign exchange reserves of the country, strengthen the exchange rate in favour of the local currency and attract more foreign investment in the coming months.

However, they maintain that the real change would be the increased foreign direct investment (FDI) in the country which fell by 30pc during July-Feb FY21 compared to the same period in FY20. Pakistan received just $1.3bn as FDI during the current fiscal year.

Published in Dawn, April 1st, 2021

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