ISLAMABAD – The recent surge of investment by foreign investors in debtinstruments is a positive sign for Pakistan economy, the State Bank ofPakistan (SBP) said on Monday.
“Recently, international investors have started investing in debtinstruments issued by the Government of Pakistan. This is largely amanifestation of their growing confidence in the positive outlook for theeconomy. As endorsed by international financial institutions, including theIMF, the ADB and the World Bank, and rating agencies, our reform program isbeginning 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 moneyand global investors having purchased 1-year bonds worth $642 million inNovember alone.
Pakistani bonds offer high returns, Pakistan’s central bank has more thandoubled its policy rate to 13.25pc – the highest in Asia – to helpstabilize the economy. The foreign inflow in bonds is expected to reach arecord $3 billion by the end of the fiscal year.
The SBP was of the view that the international confidence has been restoredafter adoption of several reforms i.e. the shift to a market based exchangerate system “which has addressed previous concerns regarding thesustainability of the exchange rate regime,” alongside improvement inPakistan’s balance of payments and reserve buffers.
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The State Bank dismissed the concept that foreign investors are luring toPakistan’s debt instruments on account of double digit interest rate.“Interest rates have been higher in the past—for example interest rateswere around 13.75 percent on average in FY11—but our debt markets did notattract interest from international investors,” said SBP.
The central bank further said that investment in government securities byinternational investors provides several benefits to the economy.
