RDA inflows up 13.63pc in February

KARACHI: Roshan Digital Account (RDA) inflows increased 13.63 percent month-on-month to $125 million in February, the central bank data showed, with analysts attributing an uptick in the inflows to rising rates of return on conventional and Shariah-compliant Naya Pakistan Certificates (NPCs).

The country has received $5.8 billion in foreign currency inflows from its citizens living abroad through RDA between September 2020 and February 2023.

A total of 536,676 digital accounts have been opened by non-resident Pakistanis (NRPs) from 175 different countries as of February 2023.

Through NPCs, $3.7 billion was invested over a 30-month period. Around $1.833 billion was invested in conventional NPCs and $1.822 billion in Islamic certificates, according to the State Bank of Pakistan figures. Pakistanis living abroad invested $49 million into the stock market.

Analysts credit rising rates of return on conventional and Shariah-compliant NPCs as well as currency depreciation for an uptick in the monthly RDA inflows.

The profit rates on conventional and Islamic certificates denominated in local and foreign currencies were enhanced by the government in January.

Major central banks continued their aggressive monetary tightening to combat rising inflation. As a result, NPC's returns were no longer competitive.

Analysts said that an upward revision in NPCs’ profit rates was desperately needed after global interest rates rose and helped to bring money into Pakistan.

The local currency depreciated after the government removed an artificial cap on it in late January. One of the requirements to revive the International Monetary Fund bailout, which has been stalled for months, is moving to a market-based exchange rate. The rupee’s depreciation convinced overseas Pakistanis to increase their investments in NPCs.

However, some analysts believe that after the central bank increased its policy rate by 300 basis points to 20 percent and the rupee depreciated against the dollar, the government may be able to attract foreign investment in rupee-denominated sovereign debt securities like T-bills and Pakistan Investment Bonds. Hot money may also assist the country increase its forex reserves and, in the short term, support the rupee's value versus the dollar.

Millions of NRPs, including holders of Non-Resident Pakistan Origin Card, who want to engage in banking, payment, and investing activities in Pakistan, can do so thanks to these 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 totally assumes all risk. However, the global increase in interest rates had intensified the pressure on the government to boost NPC returns.