RDA inflows hit a two-year low in Nov

KARACHI: Foreign currency inflows from overseas Pakistanis through Roshan Digital Account (RDA) dropped to a 24-month low of $141 million in November 2022, a local brokerage house, citing data from the central bank reported on Thursday.

These inflows stood at $239 million in November 2021.

November gross inflows are the lowest monthly inflow since December 2020, according to Arif Habib Limited.

RDA funds have been declining due to increased political uncertainty, deteriorating economic fundamentals in the country, and rising interest rates abroad.

According to data from the State Bank of Pakistan, from the launch of RDA in September 2020 to November 2022, the country received a total of $5.4 billion in inflows from the Pakistani diaspora living abroad. During this period, the amount invested through Naya Pakistan Certificates (NPCs) was $3.5 billion. Within NPCs, $1.750 billion was invested in conventional NPCs and $1.680 billion in Islamic certificates. The expatriate Pakistanis invested $47 million in the stock market.

The non-resident Pakistanis (NRPs) from 175 different countries opened 498,934 RDAs. Analysts said overseas Pakistanis have actively begun withdrawing assets from the NPCs through their digital accounts.

“We are seeing aggressive monetary tightening by the majority of central banks due to the soaring inflation. As a result, the returns on NPC are no longer competitive, and the political unrest is also reducing investor confidence and encouraging them to sell their NPC holdings,” said an analyst.

Last week, Pakistan made a payment of $1 billion Sukuk. However, the investors’ worries have not been eased because of the fast depletion of the foreign reserves amid dried dollar inflows.

The reserves with the SBP stood at $7.5 billion as of November 25. The reserves cover about one month of imports.

“Investor confidence in Pakistan's economy won't return until there is political stability. Investors are also concerned about the country’s capacity to repay its external debt,” the analyst added. The country’s external account situation is getting worse as a result of political unrest. The opposition’s threat to call early elections is the exclusive preoccupation of the current coalition government.

The International Monetary Fund’s money has been delayed because the government hasn’t met the benchmarks necessary to finish the ninth review of the bailout package. The government is not announcing taxation measures as per the IMF demand amid fear of political repercussions.

The ninth review’s completion would open the door for the IMF to disburse the next $1 billion tranche. Recently, floods caused by above-average monsoon rains linked to climate change caused heavy loss to Pakistan’s fragile economy. Damage assessments have been up to $30 billion.