Pakistan's T-bills record outflows of $78 million in August

Following the record inflow of Treasury Bills last month, the State Bank of Pakistan (SBP) noted a significant outflow of $78 million in foreign investment in the first 15 days of August.

The investor attributed the lack of interest to the declining return on T-Bills, which is likely to continue in the future.

When SBP started selling its treasury bills in July, it recorded an inflow of $258.3 million, but recent data showed that investment inflow declined sharply in August.

Experts believed two key factors causing a decline are decreasing returns on T-bills and the country’s failure to secure a $7 billion bailout programme from the IMF due to the delay in rolling over external finance from China, Saudi Arabia, and the United Arab Emirates (UAE).

The statistics showed a total inflow of $8.194 million in 15 days of August, while it was recorded an outflow of $86.347 million, the net outflow stood at $78.15 million.

From July to half of August, inflows were $271.5 million in 45 days, while outflows were $180 million, and the remaining amount of foreign investment declined to $91.5 million.

Finance experts attributed the inflow of July to stable exchange rates and attractive returns on domestic bonds. 

However, the SBP decision to cut down the policy rates by 150 points to 19.5 percent reduced the returns on T-bills.

The return on three-month T-bills declined to 17.4 percent from 19.9 percent in July, while six-month and 12-month T-bills return rates remained unchanged at 17.74 percent and 16.99 percent, respectively. 

Financial experts said that the returns are still too high compared to other developing economies, but a further cut in policy rate would decline the return on T-bills, and foreign investors may not show interest in investing in the domestic bonds.