ISLAMABAD – In an unprecedented move $3 billion inflows in Pakistaneconomy .
Pakistan is seeing an unprecedented inflow of foreign investment in debtinstruments. The latest figures showing the number has crossed $1 billionand the analysts expect it to reach a record of $3 billion by the end ofthe current fiscal year, reported Financial Timeslink.
According to the report, the benchmark interest rates have stood at 13.25per cent since the last rise in July. One senior official at the centralbank said that this had contributed to inflows of about $1 billion, withmore likely to arrive in the coming months.
The central bank has been “Pitching the Pakistani bond market directly” toforeign investors, said Saad Bin Ahmed, equity head at brokerage Arif Habib.
There are concerns that this is hot money, and at a single click this moneywill go out, possibly when the central bank cuts the policy rate. But myexpectation, considering the state of the economy, is that they may noteven cut the rates until July 2020.
Read Top Stories
Pakistani stocks have also pushed higher. The main Karachi stock index isup 13 per cent over the past month, making it the best-performing bourse of94 tracked by Bloomberg.
Charles Robertson, chief economist at Renaissance Capital, told FinancialTimes that the case for buying Pakistan’s bonds was straightforward. “Whereelse can you get double-digit yield on an undervalued currency?” MrRobertson noted that the rupee was at its lowest level in 25 years,measured by its real effective exchange rate, meaning foreigners could earnoutsized returns on local-currency bonds. This is “the first new emergingmarket reform story since Egypt in 2016”, he added.
Fidelity International portfolio manager Paul Greer told FT that despitePakistan’s large fiscal and current-account deficits “the economic reformtrajectory in the country has been improving of late and the imbalances arenow moving in the right direction”.
