Pakistan receives $140m RDA inflows, lowest since Dec ‘20

KARACHI: Foreign currency inflows from overseas Pakistanis through Roshan Digital Account (RDA) clocked in at $140 million in December, according to data from the State Bank of Pakistan on Thursday.

The latest RDA inflows are the lowest since December 2020, a local brokerage house, Arif Habib Limited said.

Since the launch of RDA in September 2020 to December 2022, the country received a total of $5.6 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, $1.772 billion was invested in conventional NPCs and $1.725 billion in Islamic certificates. Expatriate Pakistanis invested $48 million in the stock market.

The non-resident Pakistanis (NRPs) from 175 different countries opened 511,159 RDAs.

Across the world, the majority of central banks are aggressively tightening their monetary policies as a result of the skyrocketing inflation. Because of this, returns on NPCs were no longer competitive. On top of that, political upheaval has further undermined the investors’ trust, pushing them to sell their NPC holdings.

However, the one-year dollar-denominated NPC remained one of Pakistan's top-performing assets in 2022.

The holder of the US dollar NPC under RDA made 36 percent in Pakistani rupee terms due to falling rupee value. Similarly, holders of the cash dollar made a gain of 28 percent in 2022 as the official bank rate of the US dollar rose from 177 at end of 2021 to 226 now.

The investors are concerned about the frequent reduction of foreign reserves amid dried dollar inflows and increased external debt repayments.

The reserves with the SBP stood at $5.6 billion as of December 30. The reserves cover about one month of imports.

External accounts are expected to remain under pressure in 2023 with huge debt repayment and lack of financing options due to unfavorable dynamics of global financial markets. The country’s external debt repayment for FY2023 stands at $21 billion, out of which $10 billion has been paid or rolled over, according to analysts.

Although authorities are optimistic that they will be able to bridge our financing gap for the fiscal year with the help of friendly countries and rollovers, concerns regarding the quality of reserves and future debt obligation will remain a key challenge to the country’s economy.