In a positive development, Pakistan economy seek another $3 billion inflows
ISLAMABAD - The recent surge of investment by foreign investors in debt instruments is a positive sign for Pakistan economy, the State Bank of Pakistan (SBP) said on Monday.
“Recently, international investors have started investing in debt instruments issued by the Government of Pakistan. This is largely a manifestation of their growing confidence in the positive outlook for the economy. As endorsed by international financial institutions, including the IMF, the ADB and the World Bank, and rating agencies, our reform program is beginning to show results," the central bank said in a statement.
Pakistan bond market has become a profitable option for foreign investors, with sovereign bonds witnessing an unprecedented inflow of foreign money and global investors having purchased 1-year bonds worth $642 million in November alone.
Pakistani bonds offer high returns, Pakistan's central bank has more than doubled its policy rate to 13.25pc – the highest in Asia – to help stabilize the economy. The foreign inflow in bonds is expected to reach a record $3 billion by the end of the fiscal year.
The SBP was of the view that the international confidence has been restored after adoption of several reforms i.e. the shift to a market based exchange rate system “which has addressed previous concerns regarding the sustainability of the exchange rate regime," alongside improvement in Pakistan's balance of payments and reserve buffers.
The State Bank dismissed the concept that foreign investors are luring to Pakistan's debt instruments on account of double digit interest rate. “Interest rates have been higher in the past—for example interest rates were around 13.75 percent on average in FY11—but our debt markets did not attract interest from international investors," said SBP.
The central bank further said that investment in government securities by international investors provides several benefits to the economy.