RDA inflows to stay robust
Investments made under the RDA are unlikely to be pulled out aggressively as opposed to the foreign divestment from T-bills and PIBs after the Covid-19 outbreak. PHOTO: FILE
Overseas Pakistanis provided vital support for Pakistan’s economy in 2021 as they invested a significant amount of $2.9 billion in different assets through the Roshan Digital Account (RDA) over the past 14 months, which bolstered the foreign exchange reserves.
Besides, the RDA inflows aided in offsetting the negative impact of foreign divestment of around $3.5 billion from the rupee-denominated government debt securities like treasury bills and Pakistan Investment Bonds (PIBs) in the aftermath of the Covid-19 pandemic.
RDA inflows also contributed to stabilising the Pakistani rupee against the US dollar and other foreign currencies.
“Pakistani diaspora is projected to inject an additional $2 billion in the remaining seven months (December-June) of the ongoing fiscal year 2021-22,” remarked Arif Habib Limited (AHL) economist Sana Tawfik while talking to The Express Tribune.
RDA receipts are different from the remittances sent by the non-resident Pakistanis (NRPs) to their family members and friends back home.
The inflow of remittances remained larger than export earnings in 2021. Remittances are used to partially finance import payments and repay foreign debt.
Overseas Pakistanis sent record high remittances of $29.4 billion in fiscal year 2020-21. They are estimated to inflate further to an all-time high of $31.8 billion by the end of current fiscal year in June 2022, according to the research house.
Turning to the RDA, Tawfik said “we expect total inflows of over $3 billion in FY22.”
So far, overseas Pakistanis have invested a total of $2.9 billion since the launch of the scheme by the central bank in September 2020. Data breakdown suggests that they have invested $1.35 billion in the first five months (July-November) of the ongoing fiscal year.
The non-resident Pakistanis have poured a significant amount through the RDA into the Naya Pakistan Saving Certificates, which “offer lucrative returns on investment of 5-7% per annum in foreign currencies,” she said.
Pakistan has offered attractive returns on the certificates to the non-resident Pakistanis at a time when the rest of the world (especially the developed countries) is offering a nominal return of around 0.25%.
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Investments made under the RDA are unlikely to be pulled out aggressively as opposed to the foreign divestment from the rupee-denominated T-bills and PIBs after the Covid-19 outbreak.
Investors prematurely sold the government debt securities to keep cash in hand during the pandemic and their investment was also facing the risk of rupee depreciation at that time.
“The rupee is expected to recover partially against the greenback in the second half (January-June) of FY22 when the inflation reading and current account deficit are projected to improve,” she said.
The expected improvement in macroeconomic indicators along with acceleration of economic activities in the second half of FY22 are likely to encourage the overseas Pakistanis to enhance investment in a host of assets in their homeland.
They will also consider investing more after the resumption of International Monetary Fund’s (IMF) loan programme worth $6 billion.
The IMF is scheduled to take up for approval the next loan tranche of $1 billion for Pakistan on January 12, 2022. It will be followed by a Sukuk (Islamic bond) offer in the international market and other inflows from the multilateral lenders like the World Bank and Asian Development Bank (ADB).
“RDA inflows will encourage overseas Pakistanis to pour a higher amount of investment in the coming months,” she said. “Salient features of the RDA such as permission to seamlessly divest at any point in time will push them to keep investing in Pakistan.”
They can also invest in the stock market, buy a car for relatives in Pakistan, and perform charitable activities through the RDA.
Nearly 300,000 overseas Pakistanis have opened RDAs so far. At present, around 11 million Pakistanis are residing in foreign countries.
Published in The Express Tribune, December 29th, 2021.
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