KARACHI: After a two-month pause, the foreigners started making investments in high-return treasury bills (T-bills).

The latest data of the State Bank of Pakistan (SBP) issued on Monday showed that the foreigners invested $9.9 million in T-bills on Friday just after the government raised the profit rates.

During March and April T-bills and Pakistan Investment Bonds (PIBs) didn’t attract any foreign investment due to highly uncertain political situation in Pakistan. In fact, the foreigners during this period withdrew their investments from the domestic bonds.

Before the political crisis started, Pakistan received over $25m inflows in T-bills and $5m in PIBs in February.

However, the new government on April 28 made an attempt to make the domestic bonds more attractive for investment especially for foreigners by increasing the benchmark six-month T-bills rates by 114 basis points to 14.99 per cent — a move beyond the expectations of the financial market.

The cut-off yield on T-bills hit a 24-year high as the government is now paying a heavy price for borrowing from the domestic market.

Market pundits believe the ongoing political uncertainties are the main hindrance to attracting foreign investments. However, the situation is apparently better as most of the world has come out of the pandemic and the record high 14.99pc return could be an added attraction.

The return of 14.99pc is seemingly highly-attractive to foreign investors and is more than the returns when it was introduced by the SBP three years ago.

The country had succeeded in attracting over $3.5bn but the Covid-19 pandemic created havoc globally and the investment disappeared within a few months.

Experts believe that the $10m inflow could be a testing ground for others since it is from the UK only. The short-term T-bills offer quick profits plus easy withdrawal.

Published in Dawn,May 10th, 2022