Extraction of injection in local debt market records $1.789 bln in March

April 1, 2020 (MLN): Due to the continuous deterioration in economic conditions with the COVID-19 crisis across the globe, risk-averse investors fled with their hot money worth $1.77 billion net from government debt securities (T-bills and PIBs) during the month of March 2020.

Since the pandemic began, Pakistan witnessed a blow of hot money outflow. The extraction of injection further gathered pace when SBP slashed policy rate by 225 bps to 11%, as according to the SCRA data published by SBP, during the month, the country witnessed only $18.5 million investment in government securities, whereas, outflow stood at $1.789 billion. Comparing with the previous month, the situation was totally different as the country witnessed net inflows of $261 million in T-bills and PIBs.

Country-wise, $1.49 billion net from T-bills has been withdrawn by Investors from the UK, while $239.4 million net has been retracted by US investors during the month.

Cumulatively in 9MFY20, the country witnessed an injection of $3.49 billion hot money in T-bills and PIBs, out of which foreigners have pulled around $2.1 billion, indicating that $1.4 billion investment still parked in Pakistan’s debt securities.

Speaking of the last day of the month, foreign investors have pulled back $59.96 million from T-bills with Zero injection recorded.

The outflow of hot money is expected to continue further in coming days, as the fears of a global recession over COVID-19 spread likely to heighten risk aversion. In addition, the cut in policy rate has also made foreign investors reluctant to further inject their money in Pakistan’s debt market as they will now get low margins on their investment than before.

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