Pakistan receives $1.87b through RDA

Inflows expected to reach $3.5-4b over next four to five months

KARACHI:

Overseas Pakistanis are expected to ramp up investment in lucrative assets back home to $3.5-4 billion over the next four to five months through the Roshan Digital Account (RDA) and support the sustainability of country’s foreign currency reserves.

The country has received a total of $1.87 billion in 10 months (till the end of July 2021) since the launch of RDA by the central bank in September 2020, according to data uploaded by the State Bank of Pakistan (SBP) on Thursday.

“The inflows through the Roshan Digital Account are expected to reach $3.5-4 billion by the end of December 2021, considering the inflows have remained over $300 million a month in June and July 2021,” said Pak-Kuwait Investment Company Head of Research Samiullah Tariq.

Speaking to The Express Tribune, he said that the inflows had continued to grow every month since the launch of the initiative. They have played a significant role in supporting the country’s foreign currency reserves, which hit four-and-a-half-year high of $18.05 billion in mid-July 2021.

“The second phase of Raast (an indigenous payment system), expected to be implemented in October, will play a pivotal role in encouraging non-resident Pakistanis to utilise financial products of local banks to take care of their family members in Pakistan,” he said.

The second phase of Raast would enable overseas Pakistanis to order goods online for their family members living in Pakistan and pay the local merchants remotely.

Pakistani diaspora have so far invested two-thirds ($1.28 billion) of the total investment of $1.87 billion in the Naya Pakistan Saving Certificates as the government has especially designed the high profit-paying certificates for the non-residents.

Pakistanis residing in the country who have declared their foreign assets can also invest in the certificates.

The government has also allowed them to purchase cars with the help of bank financing for their family members. Besides, they may also pay the school and tuition fee of their children and utility bills online. More importantly, there is still a wide room for the growth of RDA. The inflows of $1.87 billion were received from nearly 200,000 accounts in local banks from 175 countries, Tariq said.

The government has estimated the total number of Pakistanis living abroad at around 9 million. The country may potentially encourage a minimum of 10% of them to open and operate the RDA in banks operating in the country. RDA is an alternative to the Eurobond and Sukuk, which are used by the government to raise funds from the global markets.

“The country is liable to repay the funds raised through the Eurobond at maturity in one go. On the other hand, the outflows through the RDA (which are allowed at any point in time) will be in small parts at different times,” he said.

He suggested that the government should create a pension fund under trustees and allow the overseas Pakistanis to invest in the scheme. This will help them to avoid financial stress after retirement. The fund manager may invest the non-resident savings in different assets.

Another expert said the other day that the RDA has emerged as a third viable option to maintain the foreign currency reserves after workers’ remittances and export earnings. Besides, the RDA inflows should potentially reduce the country’s reliance on short-term commercial borrowing over a period of time.

Published in The Express Tribune, August 6^th, 2021.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.