April 9, 2020 (MLN): The hot money is also the most slippery money as it flees with the same speed it comes from. After witnessing an inflow of $3.43 billion of hot money, within two months we saw a blow of $2.25 billion investment slippage in Pakistan’s debt market particularly T-bills.
To match the outflows in the short-term instruments, the outflows from the PIBs also tapped out $45.42 million of the foreign investment in the long-term instruments, indicating that out of $60.5 million since July 2020, only $15 million of foreign investment has left in long- term debt instruments.
Certainly, this has taken its toll on Pakistan's foreign reserves and PKR stability as Pakistan’s total reserves shrank to $17.38 billion as of March 27, 2020 and the Rupee came down by Rs 12.47 or 8.09% against green back during the month of March alone.
The flight of hot money from Pakistan debt market is still proceeding, as in the month of April so far, $179.8 million has been withdrawn by foreign investors with zero inflows recorded. The reason definitely is the severity of the global COVID-19 pandemic which triggered panic among foreign investors. This has put an additional pressure on PKR as it declined further by 1 Rupee or 0.6% so far this week.
Since the last session of the month i.e. on April 7, 2020 depicted that the pace of outflow is slowing down as only $8.1 million of outflow has been recorded in T-bills but the impact will not reflect as T-Bills worth Rs.235.30 billion matured yesterday.
According to the SCRA data published by SBP, the withdrawal of investment from T-bills during the fiscal year to date, mostly made by UK investors as they withdrew $1.9 billion so far followed by US investors. Although the outflow is in line with the trend in emerging markets where rapid outbreak of COVID-19 has instigated a sell-off, but if it continues, it will pose serious risk to PKR stability and Pakistan Economy.
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