RDA inflows cross $4bn till April 2022

KARACHI: The country received over $4 billion through the Roshan Digital Account (RDA) till the end of April 2022, lending some support to the dwindling foreign exchange reserves.

The RDA reached $4.2 billion during September 2020 to April 2022, data from the State Bank of Pakistan (SBP) showed on Monday. In the month of April, these inflows clocked in at $245 million.

Expatriates from 175 countries opened 403,750 accounts, which showed an increased number of non-resident Pakistanis (NRPs) sent funds through this scheme. The number of digital accounts reached 388,494 at the end of March.

The latest data showed these funds remained intact and the change of the government in Pakistan didn’t affect these flows as expected earlier. The investment schemes, launched under RDA, known as Naya Pakistan Certificates (NPCs), offer attractive rates both in rupee as well as mainstream foreign currencies such as USD, GBP, and Euro.

The SBP’s data also showed a significant amount of RDA funds are being invested both in NPCs and the capital market. From September 2020 to the end of April 2022, total investment in NPCs stood at $2.8 billion, with $1.4 billion invested in the conventional NPCs and $1.2 billion in Shariah-compliant instruments. The expats invested $38 million in the stock market.

The NCPs are higher-yielding instruments. In dollar terms, the three-, six- and 12-month NPCs offer a profit rate of 5.5 percent, 6 percent, and 6.5 percent, respectively. For three- and five-year certificates, the return is 6.75 percent and 7 percent, respectively. The return rates in rupee terms are much higher ranging from 9.5 percent to 11 percent on different tenors.

These inflows contribute to accumulating the country’s foreign exchange reserves at a time when the country is in a dire need of external finances. With the current account deficit surging and the central bank’s foreign reserves falling to as low as $10.5 billion (adequate to pay less than two months of imports), the country’s economic difficulties are increasing.

Analysts said initiatives for overseas Pakistanis such as RDA should be prioritised and proper channel flows for remittances should be maintained to keep foreign reserves afloat.

However, an immediate step that needs to be taken is the management of foreign reserves. For that all efforts should be made to start negotiations with the International Monetary Fund for the resumption of the stalled $6 billion loan programme.

“Moreover, an immediate task that needs to be taken up is foreign exchange reserve management. For that, the primary focus should be on negotiation with the IMF,” the analysts added. In September 2020, the SBP allowed approximately nine million NRPs to open an account in Pakistan through a digital and online process without any need to visit a bank branch. These digital accounts, known as RDAs, fully integrate the Pakistani diaspora with their homeland’s banking and payment system by providing access to funds transfer, bills and fee payments, and e-commerce, according to the information on the SBP’s website.