RDA inflows sink to lowest since Nov’20

KARACHI: Roshan Digital Account (RDA) inflows clocked in at $110 million in January, 2023, hitting lowest since November, 2020, the central bank data showed on Friday, with a hint that Pakistan's current economic situation and global higher interest rates took a toll on the inflows coming to the country.

The inflows sent by Pakistanis living aboard in January dropped 21.5 percent month-on-month as compared to $140 million in the previous month.

The country has received a total of $5.7 billion in foreign currency inflows through RDAs between September 2020 and January 2023. The non-resident Pakistanis (NRPs) from 175 different countries have so far opened 524,822 accounts.

Through Naya Pakistan Certificates (NPCs), $3.6 billion has been invested in 29 months.

According to the State Bank of Pakistan, $1.80 billion was invested in conventional NPCs and $1.76 billion in Islamic certificates. Pakistanis living abroad invested $48 million into the stock market.

Millions of NRPs, including holders of Non-Resident Pakistan Origin Card (POC), who want to engage in banking, payment, and investing activities in Pakistan, can do so thanks to the digital accounts, which offer cutting-edge financial options.

After Covid struck Pakistan in March 2020, dollar inflows through treasury bills and Pakistan Investment Bonds halted; the RDA was launched in September 2020 to attract investments from foreign investors.

Pakistanis living abroad invest in NPCs that offer guaranteed returns while the government assumes all risk. However, the global increase in interest rates intensified the pressure on the government to boost NPC returns.

With inflation on the rise, major central banks kept up their aggressive monetary tightening. NPC's returns were no longer competitive as a result.

To draw foreign currency inflows into the country, the government later last month raised rates of return on conventional and Shariah-compliant NPCs denominated in US dollars.

After the increase in interest rates on the world market, there was a pressing demand for increased investment in NPCs, which will result from an increase in the rate of return.

According to analysts, it was highly required after interest rates increased globally and it will aid in bringing money into Pakistan. The cash-strapped country is dealing with a serious balance of payments crisis and has less than three weeks' worth of import coverage in its foreign exchange reserves. In a time of economic unrest, Pakistan is in an urgent need of unblocking stalled funding under a $6.5 billion bailout package from the International Monetary Fund.

As of January 27, the foreign exchange reserves of the central bank stood at $3.1 billion.