Global investors have made a significant investment of $581 million in Pakistan’s short-term government debt securities, specifically in three to 12-month T-bills, during the fiscal year ending June 30, 2024. This large investment shows increasing confidence in Pakistan’s economy.
According to data from the State Bank of Pakistan (SBP) and reported by Topline Research, Pakistan received a net investment of $194 million in these debt instruments in June alone, bringing the total annual investment to $581 million. This is the second-highest net inflow in a year in Pakistan’s history, following the peak of $621 million in the fiscal year 2020. The highest monthly inflow ever was $1.4 billion in January 2020.
Foreign investors have returned to Pakistan’s debt market since January 2024. This is due to the stability of the rupee against the dollar at around Rs278 per dollar and the high return rate of around 20% on T-bills, compared to the lower 6-7% return rates in developed countries.
These investments have helped stabilize Pakistan’s foreign exchange reserves, which are now at $9.42 billion. The data shows that UK-based investors made the largest investment of $322.5 million in FY24, followed by Belgian investors with $107.5 million, and US investors with $74.7 million. Other investments came from countries like Australia, Bahrain, the Cayman Islands, Ireland, Luxembourg, and the UAE.
Muhammad Awais Ashraf, Director of Research at AKD Securities, believes that foreign investors will continue to invest in rupee-denominated T-bills. He expects the total global investment to reach the previous high of $3.6 billion within two years. The stability of the rupee-dollar exchange rate and high returns on T-bills are expected to continue attracting investments, even if the returns are slightly reduced.
Financial experts believe that hot money inflows will increase significantly once the International Monetary Fund (IMF) approves the new $7 billion loan program for Pakistan. Ashraf credits the foreign investment inflows to the SBP’s consistent policies, such as maintaining a high policy rate of 22% from June 2023 to June 2024 and making a slight reduction to 20.5% last June. Other reforms, like fixing currency markets and cracking down on currency smuggling, have also contributed to the strengthening and stabilization of the domestic currency.
