KARACHI: Foreign investments leaving the domestic market were double than the inflows during the first five months of the current fiscal year (5MFY22).

The latest data issued by the State Bank of Pakistan (SBP) on Tuesday showed that cumulative outflows from equities, treasury bill (T-bills) and Pakistan Investment Bonds (PIBs) were $816.6 million against an inflow of $407.8m during 5MFY22.

The United States of America and the United Kingdom – the biggest investors in equities, T-bills and PIBs – were at the forefront in withdrawing their maximum investments during July-Nov FY22.

Equities were hit the most as investments worth more than $505m – more than half a billion dollars – were withdrawn during the period while inflows were at $179.7m in the period under review. T-bills saw inflows at $149.8m while outflows were $239m in 5MFY22.

However, investment in PIBs fared slightly better as the inflows were higher than outflows. Investments during 5MFY22 were $78.2m while the outflows during the same period was $77.5m.

The overall investment scenario for all three options was not attractive as the biggest investors – USA and the UK – made the biggest disinvestment.

During 5MFY22, investments from USA and the UK were 166.2m and $96.4m, respectively. Outflows during the period were $376.3m and $189.5m, respectively. The United Arab Emirates – which invested $86.7m – withdrew $43.6m.

Bankers and analysts believe the sudden jump in interest rate which ultimately increased yields in these papers would be great attraction for the foreign investors.

The SBP on November 19 increased the policy interest rate by 1.5pc to 8.75pc which suddenly increased the yields on the government papers in the secondary market. The government increased returns on PIBs by up to 246 basis points on Monday, thereby providing an added attraction for foreign investors who are unable to get such high returns from other markets.

The cut-off yield on three-year PIBs was increased to 11.34pc, five-year to 11.59pc and 10-year to 11.79pc.

Analysts said PIBs rates have reached close to the pre-Covid times when the interest rate was at 13.25pc. The country attracted more than $3.5bn with such a high rate before the emergence of Covid-19 pandemic in the country in March 2020.

Following the pandemic, the central bank slashed interest rate to 7pc within three months and kept it the same for almost a year. However, rising inflation and fears of overheating economy compelled the SBP to increase the interest rate.

Published in Dawn, December 1st, 2021