Investment certificates for expats put on sale

ISLAMABAD: Government on Monday began the sale of certificates for overseas Pakistanis to lure foreign exchange reserves into the economy with a fragile external account position.

The finance ministry announced the sale of conventional Naya Pakistan certificates that can be subscribed through digital bank accounts. “Shariah-compliant version is also coming very soon,” the ministry announced through a micro blogging platform Twitter. The certificates can be subscribed by individuals through foreign currency value account or rupee value account, being marketed as “Roshan digital accounts” by the agent banks.

The funds for investment in certificates must be remitted from abroad. Currently, seven banks namely Bank Al-Falah, Faysal Bank, HBL Bank, MCB Bank, Samba Bank, United Bank Limited, and Standard Chartered Bank participate in the sale of certificates. The rupee-denominated certificates can be purchased from the balances in the investors rupee value account whereas dollar-denominated certificates can be purchased from the balances in the investors’ foreign current account.

For the investors having their accounts in currency other than dollars, the banks will debit the investors’ account by an amount equivalent to the amount of investment requested in dollar-denominated certificates by applying the exchange rate prevailing at the time of execution of the transaction.

The target market is huge. An estimated 10 million Pakistanis live abroad. Of them, 4.7 million are in the Middle East. Though Pakistan’s current account position is improving, it’s still susceptible to risks of outflows on foreign debt repayments and expected decline in remittances.

Pakistan's current account deficit narrowed to 1.1 percent of GDP in FY2020, from a peak of 6.1 percent in FY2018, due mainly to import compression and lower oil prices. Global ratings agency Fitch forecasts a slight widening of the current account deficit to 1.7 percent in FY2021 due to a modest recovery in imports and declining remittances.

While remittances were seen growing, “we view this as temporary and expect a decline of about 10 percent in FY2021 due to the impact of the global economic shock on Pakistan's overseas workers,” Fitch said last month while affirming the country’s B negative rating. The three-, six- and 12-month tenor certificates will be single-coupon securities on which principal and profit will be paid on maturity or on premature encashment.

Three- and five-year certificates will be coupon securities, on which periodic profit payment will be paid on a half-yearly basis. The Investor will place the order to subscribe the certificate electronically by visiting the webpage of their respective agent bank and giving investment details including currency, tenor and the amount to be invested.