- An amount of $90.51 million was withdrawn by foreign investors.
- Foreign purchases of Treasury bills totaled $963.4 million in FY25.
- Recent monthly fund outflows indicate a decline in foreign investor interest in the country’s bonds.
KARACHI: As outflows outpaced inflows in the first 10 days of this month, foreign investment in treasury bills (T-bills) declined, News reported.
Foreign investors invested $51.978 million in treasury bills as of January 10, while they withdrew $90.51 million, according to data released by the State Bank of Pakistan (SBP) on Tuesday. This resulted in a net outflow of $38.5 million, with December’s outflow recorded at $156.1 million.
For the current fiscal year (July 1, 2024 to January 10, 2025), foreign purchases of Treasury bills totaled $963.4 million, compared to withdrawals of $821.4 million, resulting in an inflow net of $142 million.
Recent monthly outflows indicate a decline in foreign investor interest in the country’s bonds, largely attributed to falling yields. Last month, the SBP cut its policy rate by 200 basis points (bps) to 13%, the fifth consecutive cut since June. This brings the total cuts for 2024 to 900 basis points.
Analysts believe that outflows from Treasuries are mainly due to the longer maturities of these instruments, exceeding the amounts raised through Treasuries.
However, they note that Pakistan’s stable exchange rate helps mitigate foreign exchange risk, thereby preventing larger capital outflows.
Pakistan’s external account has improved, supported by a $7 billion loan program from the International Monetary Fund (IMF).
The country recorded a current account surplus of $1.2 billion in the first half of fiscal 2025 (July-December), compared to a deficit of $1.397 billion in the same period last year, thanks to increased remittances and exports.
Additionally, profit and dividend outflows from foreign investments jumped 114 percent to $1.215 billion in the first half of the current fiscal year (January-December).
In order to preserve the country’s rapidly depleting foreign exchange reserves, profit repatriation was mainly limited during the last fiscal year.
Currently, the SBP’s foreign exchange reserves stand at $11.73 billion, enough to cover more than two months of imports.
Last week, the United Arab Emirates (UAE) rolled over for another year $2 billion in deposits with the SBP, which were maturing this month.
Pakistan is trying to secure a $1 billion loan tranche from the IMF under the Extended Financing Facility programme.
An IMF mission is expected to visit Islamabad next month to conduct the first review of the current lending program.