KARACHI: After a long gap, the treasury bills and domestic bonds attracted a $19.4 million investment in January.

The government securities have lost attraction to foreign investors after the pandemic hit the country in March 2020. Earlier, the T-bills and Pakistan Investment Bonds (PIBs) received huge inflows of $4.5 billion. However, most of the investment flew back within a few months during the Covid-19 times.

The latest State Bank of Pakistan (SBP) data showed that the country received the investment in T-bills for the second time during FY24. Previously, the country received $16m from the United Kingdom.

During the seven months of the current fiscal year, the T-bills received a total of $35.4m. The amount is meagre compared to January 2020 when the country received $1.5bn in the T-bills.

Banker said the interest rate in 2020 was about 16pc which was relatively higher than the offers in other countries. Bankers said presently the returns on T-bills are slightly below the 22pc policy rate. This is highly attractive but the political uncertainty is the key behind the low inflows in the T-bills.

Analysts said the economy is not under serious threat nor facing an emergency-like situation as it faced at the beginning of the current fiscal year. Pakistan was reached at the edge of sovereign default in the first week of July but was averted thanks to the immediate release of $1.2bn under the IMF’s $3bn Stand-By Arrangement.

“The economy is relatively in a better position with a stable exchange rate while the State Bank’s foreign exchange reserves stand above $8bn making the overall situation conducive for the investments,” said a senior banker.

However, he maintained that the political uncertainty has developed an anti-investment environment. After general elections, the situation may improve, he hoped.

The government had launched these domestic bonds for foreign investment but the returns are paid in local currency. The foreign investors can take out the entire investment with the profits. However, the prolonged uncertainty proved a hurdle for the investor.

Analysts believe that despite a stable exchange rate, there is no surety about the sharp change in the value of PKR since the economic fundamentals have not changed. They said the recent IMF’s estimate of the growth rate disappointed the stakeholders as well as the foreign investors. The IMF estimates GDP growth of 2pc for FY24.

Published in Dawn, February 4th, 2024

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