Overseas investors pump record $2.58bln in govt debt

KARACHI: Government securities attracted a record $2.58 billion in overseas cash during the current fiscal year of 2020 as a number of global investors re-allocate resources to Pakistan, which is amongst the top yielding debt market in the region, analysts said on Saturday.

With rates falling across economies in the region, Pakistan benchmark yield at ballpark 13.25 percent is a draw-card for global funds chasing returns, they added.

Foreign investment in short-term treasury bills exceed $2.55 billion since the beginning of the current fiscal year while longer tenor Pakistan Investment Bonds attracted $36 million as the country is seeing hot money inflows of an unprecedented level on high interest rates and exchange rate stability.

The latest T-bills auction held on January 22 yielded $138 million, taking total foreign cash in government debts to $1.103 billion in January 2020 — the highest amount for a month.

The US, UK and the UAE have increased their portfolios of government t-bills and Pakistan Investment Bonds.

Analysts said foreign investors are likely to find the interest rate differential between Pakistan and other similar economies attractive.

“Globally there are signs of a tepid future for interest rate, however Pakistan does not reflect the same,” an analyst said. “With a relatively stable currency and high yields, we are expected to have over $3 billion net inflows into domestic debt securities this fiscal year.”

Analysts, however, also said the central bank is concentrating on building up of forex reserves on the basis of very risky inflows and that is why the SBP is unlikely to cut interest rate as asked or expected by all stakeholders

They expect the SBP to keep policy rate on hold in the upcoming monetary policy reviews as it wants to lure foreign investors by offering high interest rates. The inflows through treasury bills helped the government build its reserves which pushed the central bank reserves to $11.731 billion and the country’s total reserves to $18.271 billion.

The central bank in December said investment in government securities by international investors provides several benefits to the economy. Such investment helps to deepen capital markets by increasing the pool of funds available in the local market and diversifies the investor-base.

The bank said such investment also helps to allow banks to deploy available funds for lending to the private sector since there is growing competition from international investors for placements in government securities.”

The central bank expected further inflows in longer-dated maturities on attractive taxation structure and as investors pose trust on economic stability measures taken by the government.