RDA inflows reach $7.035bn by November end

KARACHI: Foreign currency inflows through Roshan Digital Accounts (RDAs) for Pakistanis living abroad crossed $7 billion in November, offering a glimmer of hope for the country’s dwindling foreign exchange reserves and remittances, central bank data showed on Monday.

Gross RDA inflows for the end of November were $7.035 billion, up from $6.898 billion at the end of October. On a month-on-month basis, however, these inflows decreased by 3.52 percent. In November alone, the holders of RDA accounts made deposits totaling $137 million, down from $142 million in October.

Out of the total received funds, $1.531 billion has been repatriated, while $4.322 billion has been utilised locally. The net repatriable liabilities are $1.182 billion after this. The latest RDA data comes as Pakistan expects to receive the next tranche of around $700 million from the International Monetary Fund under its existing loan programme next week.

The IMF’s executive board will meet on January 11 to consider final approval for the disbursement of the second tranche under its stand-by arrangement. The government should encourage non-resident Pakistanis to open more Roshan digital accounts and send in more remittances, as the RDA is a source of remittances. Additionally, these inflows boost the foreign exchange reserves of commercial banks, which is reflected in the country’s total forex reserves.

The forex reserves held by the central bank dropped by $237 million to $7.020 billion as of December 1. Remittances from Pakistani citizens working abroad fell by 10 percent to $11 billion in the first five months (July-November) of the current fiscal year.

RDA inflows are improving slightly. Despite the rise in the profit rates on Naya Pakistan Certificates (NPCs), RDA funds showed a modest increase from the previous month. Given the tight global liquidity position and monetary policies, it appears that the rate hike is insufficient.

In September 2020, the State Bank of Pakistan introduced the RDA initiative. During the Pakistan Tehreek-e-Insaaf (PTI) government, RDA funds increased significantly. These inflows decreased during the Pakistan Muslim League Nawaz coalition administration, which ended its parliamentary term in August. Several triggers led to the drop in RDA inflows, including rising rates of inflation, faltering local and global economies, high interest rates, and political uncertainty.

According to the SBP’s data, a total of $784 million in net investments were made through RDA between September 2020 and November 2023. $432 million was invested in Islamic certificates, and $323 million was placed in conventional NPCs. The amount invested in the stock market was $29 million. There were $23 million in additional liabilities. The net repatriable liabilities were $1.182 billion, with a $374 million account balance.