The data released by the State Bank of Pakistan (SBP) showed that the foreign investors withdrew more than one billion dollars from the domestic bonds (treasury bills (T-bills) and Pakistan Investment Bonds (PIBs))during the 2021-22 fiscal year.
This is despite the highly attractive returns on these domestic bonds. The inflows of foreign investment into these bonds almost stopped during March and April when the political tensions were at their peak.
However, the country received $9.9 million on May 6 after a gap of almost two and half months.
The second half of the outgoing fiscal year proved worst for the country as investments from domestic bonds were withdrawn during this period.
Before the political crisis, Pakistan attracted over $25m in T-bills and $5m in PIB in February.
During the entire FY22, the domestic bonds received a total of $341.2m ($236.9m in T-bills and $104.3m in PIBs) while the outflows were $1.055bn.
The T-bills and PIBs rates were regularly increased during the year and in the last auction held on June 29, the 3-month T-bills rate was 15.2 per cent, 6-month 14.8pc and 12-month 14.95pc.
The latest PIB rates for three-year, 5-year and 10-year were 13.97pc, 13.18pc and 13.15pc respectively.
The very high rates of these bonds could not attract foreign investment while the total outflows in FY22 including equity ($943m) were almost $2bn. The country attracted $420.36m in equities. The cumulative net outflow (minus inflows) remained $1.237bn during the just-ended fiscal year.
During FY22, the inflows from the United States (including $199.9m from equity) were $283.2m while the total outflow was $900.3m, reflecting the disappointing situation for the policymakers who are hoping to see higher inflows.
The inflows from the United Kingdom were $195.2m while the outflow was $421m. The 3rd largest investor was the UAE, with an inflow of $109m while the outflow was $251m.
In June, T-bills saw an inflow of $22 million, while the outflow stood at $62.8 million. Meanwhile, there was no activity in PIBs in the last month of the outgoing fiscal year. However, equity saw an inflow of $31.4 million while the outflow was $35.3 million.
It is believed that the prevailing political uncertainty is the main hindrance to foreign investment in domestic bonds. However, the financial sector believes the weak external account position was the main reason for the investors to avoid coming to Pakistan.
