KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Thursday the country will meet all foreign debt obligations on time.
“There should be no concern about that,” he said while speaking at a gong-ringing ceremony at the Pakistan Stock Exchange (PSX).
The risk of sovereign default hit its highest level since November 2009 early this week. The country’s five-year credit default swap (CDS) — a type of insurance against the risk of sovereign default — increased by more than three percentage points on Oct 25 to reach 52.8 per cent, a 13-year high.
The rising CDS level is reflective of investors’ dwindling confidence in Pakistan’s ability to pay back its international loans.
“Recent progress relating to international financial institutions is a positive development,” said the SBP governor while referring to the seventh and eight reviews of the International Monetary Fund programme as well as the inflow of $1.5 billion from Asian Development Bank.
He said additional inflows from other multilateral and bilateral lenders, including Asian Infrastructure Investment Bank, are also expected soon. “These inflows will not only help us meet our debt obligations but also improve our foreign exchange reserves,” he said.
Earlier, Mr Ahmad formally launched the Roshan Equity Investment (REI), a product offered to non-resident Pakistanis (NRPs) under the umbrella of Roshan Digital Accounts (RDAs) introduced by the SBP in 2020. REI allows NRPs to invest in the stock market digitally.
Mr Ahmad said RDAs have provided NRPs with an opportunity to connect with the domestic banking system. He said NRPs from 175 countries have opened more than 484,000 RDAs and brought in total inflows of around $5.28bn. The investment in conventional Naya Pakistan Certificates has been $1.7bn while that in Islamic certificates is $1.6bn.
“However, investments via RDAs into the stock exchange have been relatively subdued. They amounted to only $35 million,” he said, adding that the formal launch of REI is expected to spur investment in the equity market through a fully digitised process.
In his pre-recorded message, Securities and Exchange Commission of Pakistan Chairman Aamir Khan told the audience the enabling environment created through digital account opening in the stock market and mutual funds, e-IPO process and linkages with RDAs led to a 11pc and 6pc growth in the investor base in fiscal years 2021 and 2022, respectively.
Speaking to Dawn on the sidelines of the launch, PSX Chief Operating Officer Nadir Rahman said the exchange is working closely with the SBP to promote the trading of government debt on the bourse. “The channel is already available, but it’s restricted at the banking level,” he said.
Treasury bills have been tradable on the PSX since 2014. But the investment avenue hasn’t gained popularity because of the tedious process. The retail investor must go to a bank and open an Investor Portfolio Securities (IPS) account, which is a custodial account maintained for buying and holding government debt.
The PSX will soon enable investors to open IPS accounts under the umbrella of NCCPL,” he said while referring to National Clearing Company of Pakistan, the entity responsible for the settlement of trades.
“Treasury bills will be traded conveniently like an ordinary stock,” Mr Rahman said.
Published in Dawn, October 28th, 2022