Foreign investors return to Pakistan Investment Bonds with $ 240 million – Journal


KARACHI: Pakistani Investment Bonds (GDP) attracted the highest foreign investment of over $ 100 million in March alone, reflecting the growing appeal of foreign investors keen to enjoy yields of up to 10 %.

The latest data released Wednesday by the State Bank of Pakistan showed that foreign investors invested $ 240.69 million in BIPs during the July-March FY21 fiscal year.

Bankers recalled how investments in GDPs and treasury bills (up to $ 3.5 billion) skyrocketed in three months after the Covid-19 pandemic hit Pakistan last year .

Coronavirus cases have increased since last month, and the government has imposed smart lockdowns in many areas, but has kept trade and industries open. The entries in the BIPs reflect that investors are not afraid of the worsening pandemic in the country.

GDPs attracted $ 103.09 million in March, the highest inflow of the current fiscal year. GDPs attracted $ 37.6 million in February this year.

For bankers, the growing influx into BIPs is a reflection of improved confidence in the Pakistani economy, especially the current account surplus which has provided further support to their confidence.

However, some bankers said the return of up to 10 percent on GDP was the biggest draw because nowhere in the world were such high returns available with a sovereign guarantee.

Confidence in Pakistan is also reflected in the country’s latest offer through Eurobonds. Eurobonds received offers worth $ 5.3 billion and the government raised $ 2.5 billion. The 5-year, 10-year and 30-year bond yields were 6%, 7.375pc and 8.875pc, respectively.

The GDP details show that the highest amount of US $ 115.2 million was invested from the United States during July-March FY21. Investments by the United States for the month of March alone amounted to $ 23.65 million. The returns on GDP are much higher than the prevailing interest rates offered in the United States.

The United States cut its interest rates by one percentage point from 1pc to an annual rate of 0pc. The US Federal Reserve cut the rate to nearly 0pc on March 15, 2020 in an attempt to stimulate the economy that has been hit by the pandemic.

On January 27, 2021, the US Federal Reserve kept its target for the federal funds rate in a range of 0% to 0.25%.

European countries are paying a high price for the Covid-19 which has hit their economies hard. Investors there have been looking for higher returns like those offered by GDPs.

The second highest influx was recorded from Luxembourg. The country’s investment in PBBs stood at $ 77.32 million in March alone, while its total investment reached $ 91.9 million in the nine months of FY21 (9MFY21 ).

Investments from the Philippines and England amounted to $ 21.45 million and $ 10.5 million, respectively, in fiscal year 9MFY21.

The financial sector estimates that the high inflows due to borrowing from the International Monetary Fund, the World Bank and the Asian Development Bank and the raising of $ 2.5 billion from Eurobonds would increase the country’s foreign exchange reserves. , strengthen the exchange rate in favor of the local currency and attract more foreign investment in the months to come.

However, they maintain that the real change would be the increase in foreign direct investment (FDI) in the country, which fell 30% between July and February FY21 compared to the same period of FY20. Pakistan received only $ 1.3 billion in FDI in the current fiscal year.

Posted in Dawn, April 1, 2021


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