KARACHI: The first month of the 2021-2022 fiscal year passed without any inflow of foreign capital into Pakistan Investment Bonds (GDPs) which attracted $ 256 million in the outgoing fiscal year.
Data released Friday by the State Bank of Pakistan showed a sharp halt in foreign capital inflows for BIPs in July against a net inflow of $ 22 million in June.
With the emergence of Covid-19 in March of last year, the country saw net outflows of foreign investment in domestic bonds and the stock market, but inflows started from September 2020, in particular in the BIPs.
GDPs still offer the highest returns ranging from 8.69% for three years, 9.198% for five years and around 10% for 10 years. Market experts believe the offer is very attractive for BIPs, but developments in Afghanistan have created uncertainty for investors.
“The rapid and sudden return of US forces from Afghanistan and war across most of the country has created fear among foreign investors as well as Pakistanis about the possible negative impact,” said a senior banker.
Bankers and analysts believe that GDPs have offered a much higher return compared to both emerging and developed economies, but fear of the uncertain situation in Afghanistan and the fourth wave of Covid-19 in Pakistan has emerged. discouraged foreign investors.
Data shows that in July, investment outflows from BIPs were $ 8.3 million; mainly from the UK and the rest of Luxembourg. Outflows to the UK were $ 6.76 million and $ 1.5 million to Luxembourg.
However, the shifting trend for investment in Treasuries continued in July as there was little difference between inflows and outflows. In June, the trend changed for the first time in FY21, with inflows of treasury bills exceeding outflows.
Inflows in June were 163.4 million dollars while outflows were 150.8 million dollars; in July inflows were $ 63.5 million and outflows were $ 68.6 million.
The biggest difference was seen in entries and exits in the stock market. Inflows during FY22 of July were $ 26.7 million while outflows were $ 49.2 million.
Foreign investments in BIPs were not diversified, on the contrary, they were limited to a few countries. The highest inflow of GDP came from the United States, reaching $ 118.5 million in fiscal year 21. Inflows from Luxembourg came second with $ 115.3 million.
Another Pakistani project to collect US dollars was the Roshan digital account which was launched in the second quarter of the previous fiscal year. The governor of the State Bank recently said inflows through the GDR reached $ 1.8 billion.
Bankers believe the influx of Treasuries could turn into hot money again as the trend shows; the amount of entries in the last quarter of FY21 had increased significantly.
Posted in Dawn, August 1, 2021