Foreign investors withdraw $38.5m from T-bills by Jan 10

• Amount of $90.51 million has been withdrawn by foreign investors.
• Foreign purchases of T-bills have totalled $963.4 million for FY25.
• Recent monthly outflows indicate foreign investors' waning interest in country’s bonds.
  

KARACHI: As outflows exceeded inflows in the first 10 days of this month, foreign investments in Treasury bills (T-bills) have declined, The News reported.

Foreign investors invested $51.978 million in T-bills by January 10, while they withdrew $90.51 million, according to data released by the State Bank of Pakistan (SBP) on Tuesday. This resulted in a net outflow of $38.5 million, with December’s outflow recorded at $156.1 million.

For the current fiscal year (from July 1, 2024 to January 10, 2025), foreign purchases of T-bills have totalled $963.4 million, compared with withdrawals of $821.4 million, leading to a net inflow of $142 million.

The recent monthly outflows indicate a waning interest among foreign investors in the country’s bonds, attributed largely to declining returns. Last month, the SBP cut the policy rate by 200 basis points (bps) to 13%, marking the fifth consecutive rate cut since June. This brings the total reductions for 2024 to 900bps.

Analysts believe that outflows from T-bills are mainly due to higher maturities of these instruments exceeding the amounts raised through T-bills. 

However, they note that Pakistan’s stable exchange rate helps mitigate currency risk, preventing larger outflows.

Pakistan’s external account has shown improvement, supported by a $7 billion loan programme from the International Monetary Fund (IMF). 

The country recorded a current account surplus of $1.2 billion in the first half of the fiscal year 2025 (July-December), compared with a deficit of $1.397 billion in the same period last year, aided by increased remittances and exports.

Additionally, the outflow of profits and dividends from foreign investments surged by 114% to $1.215 billion during the first half of the current fiscal year (January-December). 

To preserve the country’s rapidly depleting foreign exchange reserves, the repatriation of profits was primarily restricted in the last fiscal year.

Currently, the SBP’s foreign exchange reserves stand at $11.73 billion, sufficient to cover over two months of imports. 

Last week, the United Arab Emirates (UAE) rolled over $2 billion in deposits with the SBP for another year, which were maturing this month.

Pakistan is trying to secure a $1 billion loan tranche from the IMF as part of the Extended Fund Facility programme. 

An IMF mission is scheduled to visit Islamabad next month to conduct the first review of the current loan programme.