RDA inflows top $7.4 billion; February sees slight slowdown

Foreign-based Pakistanis find investing in dollar-denominated NPCs more alluring than holding their money in any foreign bank

By Our Correspondent
March 20, 2024
A foreign currency dealer counts US dollar notes at a currency market in Karachi on July 19, 2022. — AFP

KARACHI: The Roshan Digital Account (RDA) inflows have reached a cumulative total of $7.478 billion by the end of February 2024, data from the State Bank of Pakistan (SBP) showed on Tuesday.


However, the inflows for February stood at $141 million, a slight decrease from January’s $142 million and below the average monthly inflow of $178 million since the RDA’s inception in September 2020.

Despite higher interest rates, RDA inflows have been modest. The State Bank of Pakistan kept its benchmark interest rate at a record 22 percent on Monday, citing growing inflation risks.

Notwithstanding some decline, the RDA scheme has grown to be a significant source of inflows for Pakistan since its inception in September 2020. This helps Pakistan's foreign exchange reserves, which are currently at $8 billion, which are still better than the $4.4 billion they were at the end of June 2023, and are enough to cover two months of imports.

The SBP is targeting minimum forex reserves of $9.1 billion by the end of this fiscal year. Of the total amount received, $4.667 billion has been used locally and $1.559 billion has been repatriated. The SBP data showed that after this, the net repatriable liabilities stood at $1.252 billion.

Non-resident Pakistanis (NRPs) can use the RDA facility to remotely open accounts with specific Pakistani banks and conduct banking activities like money transfers, utility, education, and other service payments, as well as investments in Pakistan, through an online system.

The SBP data showed that between September 2020 and February 2024, net investments through RDA totaled $837 million. $304 million was invested in conventional NPCs and $501 million went to Naya Pakistan Certificates (NPCs) (Islamic). $32 million was invested in the stock market. There were additional liabilities of $24 million. There was a $3892 million account balance and $1.252 billion in net repatriable liabilities.

Foreign-based Pakistanis find investing in dollar-denominated NPCs more alluring than holding their money in any foreign bank because the yield on their US dollar investment is higher.

The newly elected government is in negotiations with the International Monetary Fund for the second and final review of a $3 billion loan programme. The current standby arrangement with the IMF expires in April. Pakistan also intends to secure a new larger and longer bailout package from the IMF.

During an analyst briefing following the monetary policy meeting on Monday, the central bank’s governor Jameel Ahmad said that the total external financing requirement for the current fiscal year is $ 24.3 billion, out of which most of the amount has already been paid or rolled over. According to him, the SBP estimates further rollovers worth $4 billion, and the net payable in FY24 stands at $3.5 billion which is better than earlier estimates.

The SBP expects the current account deficit to be on the lower side of the projection (0.5 percent to 1.5 percent of the GDP) in FY24.