KARACHI: Inflows through the Roshan Digital Account (RDA) dropped by 11 per cent to $200 million in June, down from $224m in May, according to the latest data from the State Bank of Pakistan (SBP). During June, $14m was repatriated, while $142m was utilised locally.

The data, released on Friday, shows that the country received $8.255 billion through RDA since its launch in September 2020 up to the end of June 2024.

The initiative was introduced to attract dollar inflows and mitigate the economic shock caused by the rapid outflow of hot money due to the Covid-19 pandemic in 2020, which saw approximately $4bn exit domestic bonds.

A significant portion of these inflows, $5.212bn, was utilised locally, providing substantial relief to the government, which has been grappling with dollar shortages.

Overall inflows surpass $8.2bn since initiative’s launch in 2020

To conserve foreign exchange, the government drastically reduced imports in the fiscal year 2022-23, leading to a contraction in growth, with continued import restrictions into FY24.

Cumulatively, about $1.6bn of the $8.2bn in overall inflows has been repatriated, with total repatriable liabilities standing at $1.4bn by the end of June 2024.

Of the total outstanding liability, $940m is held in Naya Pakistan Certificates (NPCs), including $348m in conventional NPCs and $592m in Islamic instruments.

Despite recent improvements in Pakistan’s rating by Fitch and S&P, the country remains unable to raise dollars through international bond markets.

The government is now exploring the Chinese market with the potential launch of panda bonds. However, financial experts in Pakistan believe that the timing was not suitable, stressing that the Chinese market would not respond unless Pakistan settled its debts and payments issue with Chinese investors,

The government is considering engaging marketing agencies for the Panda Bonds launch, having received bids from three Chinese and two Pakistani companies.

However, financial experts caution that these companies will be paid agents and not accountable for the success of the bonds. They emphasise that the government’s resolution of Chinese debt re-profiling issues is crucial for a positive market response.

Experts also believe that the decline in RDA inflows in June reflects increasing debt servicing challenges, which may discourage investors.

Published in Dawn, August 3rd, 2024