KARACHI: Pakistan received cumulative inflows of $6.617 billion from overseas Pakistanis under the Roshan Digital Account (RDA) between September 2020 and August 2023, the central bank data showed on Tuesday.
The RDA is a scheme launched by the government and the State Bank of Pakistan (SBP) in September 2020 to facilitate non-resident Pakistanis to open bank accounts and invest in various sectors of the economy. According to the SBP data, out of the total inflows, $1.484 billion was repatriated, whereas $4.006 billion was utilised locally. Accordingly, there was a $1.128 billion net repatriable liability overall.
The data also showed that $320 million went to investing in conventional Naya Pakistan Certificates (NPC), and $395 million was invested in Islamic NPC. The NPC are government-backed debt securities that offer attractive returns to investors in both local and foreign currencies.
The Roshan equity investment was $18 million, the account balance was $375 million, and the other liabilities were $20 million. In order to attract more investments in Pakistan, this month, the government increased the rate of return on the conventional NPCs, a move which will help boost the country’s foreign exchange reserves and support its balance of payments. This is the second time this year that the NPC’s return rate has increased; the first time was in January.
The SBP announced an increase in profits for conventional NPCs beginning on September 1, 2023, in accordance with instructions from the federal government. The rates on NPCs have been increased in a range of 1.25-1.50 percent in dollar and 1.5-6.0 percent in rupee. Analysts said that as NPCs were becoming less attractive due to rising global interest rates, the flows under RDA had lost momentum.
“The RDA inflows have slowed down considerably in recent months as the interest rate differential between Pakistan and other countries has narrowed,” an anlyst said.
He said that the increase in NPC rates would help revive the interest of overseas Pakistanis in investing in Pakistan, but it would also increase the cost of borrowing for the government. Pakistan’s foreign exchange reserves held by the central bank increased by $56 million to $7.695 billion in the week ending September 15.
In August, Pakistan's current account deficit was $160 million, down 79 percent from the same month last year.
In August, the current account deficit decreased by 79 percent month-on-month. In July, the nation experienced a $775 million deficit. The first two months of the current fiscal year saw a 54 percent reduction in the current account deficit, to $935 million. The deficit for the same time of the previous fiscal year was $2.035 billion. The decrease in the deficit can be primarily attributed to a reduction in imports.
“If we anticipate a similar trade deficit level, along with the expected recovery in remittances and a higher realization of export proceeds, the country's current account may return to a positive balance in the coming months,” said Insight Securities in a note.
“However, it's worth noting that the recent upswing in international crude oil prices poses a potential risk to imports, given that petroleum sector currently accounts for approximately 25 percent of the total import bill,” it added.
“Sustaining a current account surplus is crucial for the economy, especially considering that the country's reserves currently provide less than two months worth of import cover. Enhancing the flow of remittances through effective administrative measures is a low hanging fruit that authorities should seize.”
During an analyst briefing on September 14 after the announcement of the monetary policy, the central bank governor Jameel Ahmed said in FY2024, Pakistan is scheduled to repay a total of $24.6 billion, which includes $3.4 billion in interest payments and slightly over $21 billion in principal repayments.
So far this fiscal year, an amount of $2.8 billion has been successfully returned, consisting of $2.2 billion in principal and the remaining $0.6 billion in interest. This leaves an outstanding balance of $19 billion yet to be settled.
Approximately $11 billion of this amount is anticipated to be rolled over, with $8 billion already confirmed for rollover and the remaining $3 billion in rollover commitments in the pipeline. Consequently, the net repayable amount stands at $8 billion.