KARACHI: Foreign investment in market treasury bills has sharply declined, with foreign investors withdrawing $149 million so far in January 2025.
Analysts said the significant pullback is largely attributed to the continued cuts in the country’s policy rate, which have reduced the profitability of short-term government securities.
Since June 2024, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has slashed the key policy rate by a cumulative 10 percentage points, bringing it down to 12 percent in January 2025 from 22 percent in June 2024. This reduction was made in response to lower inflation and a comparatively improved external account balance.
The cut has resulted in a dip in the profit margins for short-term government securities, with the yields on 3-month and 6-month T-bills falling to 11.5854 percent and 11.4048 percent, respectively.
As a result of this significant decline in MTBs’ yields, foreign investors continued to withdraw investment from short-term government papers and pulled out $149 million from MTBs during the first 24 days of January 2025.
According to SBP, foreign investment in T-bills stood at just $117.15 million till 24th January 2025, leading to a net outflow of $32.4 million.
Meanwhile, Pakistan Investment Bonds (PIBs), which offer long-term investment options, failed to attract any foreign capital during January 2025. In fact, PIBs witnessed a massive outflow of $0.875 million during the first 24 days of January 2025.
Despite the challenges in the short-term T-bill segment, the overall performance for foreign investment in government securities during the first seven months of the fiscal year remains positive. From July 1, 2024, to January 24, 2025, foreign investments in T-bills amounted to $1.028 billion, while withdrawals stood at $880.4 million, resulting in a net inflow of $148.2 million for the period.
Moreover, foreign investment in long-term bonds, such as PIBs, has shown more resilience. Over the first seven months of FY 2025, the total foreign investment in PIBs reached $19.604 million, compared to a marginal outflow of $2.04 million during the same period.
Copyright Business Recorder, 2025
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