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T-bills bounce back as foreign investors show confidence

Pakistan's treasury bills and Pakistan Investment Bonds have made a recovery in the fiscal year 2022, meaning once again the inflows are greater than the outflows. T-bills and PIBs did really well during the FY20, till March 2020, when the pandemic began economic disruptions. However, even today, the investors are only eyeing the short-term T-bills.

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The State Bank of Pakistan’s recent data shows that the foreign investment in government securities has taken a turn for the better for the first time since March 2020.

The data shows that for the ongoing month, the inflow of money in the treasury bills (T-bills) has reached $15.98 million, as opposed to the outflow of $12.14 million.

This means that the net inflow of money has been on the positive side, reaching $3.84 million by the 16th of August.

As the pandemic began, the investment in the T-bills and Pakistan’s Investment Bonds saw a stark fall, despite coming from a very stable position in the prior months, Dawn reported.

It is worth mentioning that prior to the pandemic, the government securities were very attractive, as they were termed ‘hot money’ in the financial markets. This was due to the attractive rate of return set by the government.

In the auction held on 20th November 2019, the returns on three-, six- and 12-month T-bills were 13.51%, 13.28%, and 13.24%, respectively, very attractive compared to what was offered by governments abroad.

This meant that in November alone, $1 billion were invested in treasury bills. In the nine-month fiscal year 2020, from July 2019 to March 2020, the inflows in the securities reached $3.5 billion.

However, the onset of the pandemic led the State Bank of Pakistan to take drastic measures to reduce the interest rate on securities by 6.25 per cent to 7 per cent, and has since been constant at this level to support borrowing, and thus increasing economic activity in the economy.

Fast forward to fiscal year 2022 (FY22) in the first two months till 16th August, the net inflows in T-bills remained at $79.5mn while the outflows were slightly up at $80.7mn.

However, the investment is limited by diversity, meaning a less number of countries invest in Pakistan. For the ongoing FY22, the inflows for T-bills were $49.9m from UAE; $21m from the UK, and $8.2m from Singapore.

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Another important factor to note in the recent months is that investors are investing in T-Bills with a shorter maturity, with the returns on three and six months T-bills set at 7.24pc and 7.48pc, respectively.

Similarly, the PIBs also showed that inflows were higher than outflows for the FY22, as inflows stood at $16mn and outflows at $8.3mn.

This shows that investors maybe are uncertain of the economy in the long run, as only short-term investment options are being considered by investors.

Foreigners invested $84.60 million in government securities since the beginning of the current fiscal year of 2021/22, which is higher than $76.92 pulled out in the same period from Pakistan’s debt market, State Bank of Pakistan data showed on Monday.

Investment in FY21

Foreigners invested $84.60 million in government securities since the beginning of the current fiscal year of 2021/22, which is higher than $76.92 pulled out in the same period from Pakistan’s debt market, State Bank of Pakistan data revealed.

According to the data, foreign investors invested $68.62 million in Treasury Bills and $16.07 million in Pakistan Investment Bonds (PIBs) as of August 06, 2021, respectively. However, foreigners pulled out the same $68.62 million from T-bills and $8.30 million from PIBs. The net inflows remained at a positive of $7.67 million.

Analysts believe that the reason for greater inflow in government securities is that the IMF is expected to disburse $2.8 billion to Pakistan. Thus, the sentiment towards the currency and forex outlook of Pakistan has improved.

Read More: Pakistan appoints eight new Chinese counselors to boost investments

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