Treasury Head Foresees Billions in Foreign Investments

Pakistan's economy is currently witnessing a surge in interest from international debt portfolio investors, particularly in government treasury bills. In March and April, foreign investors have injected a total of $110 million, with a year-to-date inflow of $152 million for FY24. This influx of funds indicates a positive outlook on the country's stability and yield, as noted by a treasury head of a bank who anticipates further investments ranging from $2-3 billion.

However, not all market participants share the same optimism. Some express concerns over the potentially expensive nature of this borrowing, highlighting the borrower's limited control over the situation. This debate on 'hot money' mirrors discussions from 2019-20 when the State Bank of Pakistan attracted over $3 billion in T-Bills before facing disruptions due to the COVID-19 pandemic.

Despite attractive interest rates, investors were previously deterred by currency risks. The current perception of a stable Pakistani Rupee has renewed investor confidence, prompting them to consider T-Bills as a lucrative investment option before anticipated interest rate reductions. The upcoming monetary policy announcement is expected to signal a downward trend in interest rates, prompting foreign investors to capitalize on the current stability and invest in T-Bills.

While the finance minister aims to diversify external financing sources, attracting hot money serves as a short-term solution to bolster foreign exchange reserves and enhance economic stability. As the government works towards improving credit ratings and exploring long-term capital market options like Euro Bonds, the influx of hot money, both in T-Bills and the stock market, plays a crucial role in strengthening Pakistan's economic position.