In the last five months, foreign investors have withdrawn $471.7 millionfrom Pakistan’s debt market owing to reduced policy rates introduced by theState Bank of Pakistan (SBP) and the second wave of Corona, that seems tobe worse than the first one, according to the datalinkbySBP.

Expertslinksaythat an increased withdrawal of money from the local fixed income market isbecause the debt interest rate is not attractive enough for the foreignerswith the new interest rates set at 7 percent since March.

Saad Hashemy, executive director at BMA Capital, says, “*The withdrawalcould be because rates are close to all-time lows and are not lucrativeenough for investors. Increase in rates will result in losses and maturinginvestment is not being rolled over as foreign investment in the local bondmarket started late last year.*”

The Newslinkquotedanalysts as saying, “*Analysts said the central bank seems reluctant totighten monetary policy till the first quarter of next year to help revivelockdown-battered economic growth. They expect a gradual 1 to 2 percentrise in interest rates till June. An average of 7 percent yields on thetreasury bills and 8-10 percent on the investment bonds are stillattractive for the foreign investors when compared with negative andnear-zero interest rates in the United States and Europe*.”

Even though the foreign investors have been withdrawing money, the netforeign exchange reserves of the country have still been going up, standingat $13.4 billion in November 2020 link.

Image Source: Daily Timeslink