RDAs hit $125m in Feb despite revised RoR

Inflows enhanced by $15m to $125m compared to 26-month low in Jan

KARACHI:

The flow of foreign investment made through Roshan Digital Accounts (RDAs) by overseas Pakistanis in a range of assets improved to $125 million in February, but remained comparatively low despite the government revising its rate of return in the recent past.

The inflows have enhanced by $15 million to $125 million in the month compared to the 26-month low hit at $110 million in January. They, however, ranked at the second lowest position in the past 27 months in February, according to data released by the State Bank of Pakistan’s (SBP) on Wednesday.

The slowdown of inflows is worrisome for the government at a time when foreign currency reserves stand at a critical level and it is managing a high risk of default on foreign debt repayment.

As per data, gross investments through RDAs have cumulatively increased to $5.8 billion in February in the past 30 months since it was introduced in September 2020.

Net investment, however, is significantly lower (almost half) compared to gross investments as non-resident Pakistanis have maintained investing and withdrawing money over the period of time. A large fragment of the RDA investment typically goes into Naya Pakistan Certificates (NPCs).

A financial expert, who requested anonymity, said the government has to revise up the rate-of-return (RoR) on the saving certificates to continue attracting notable investments through RDA. According to data, non-resident Pakistanis have invested a gross amount of $3.86 billion in saving certificates and the stock market.

The breakup of the data suggests they have invested $1.83 billion in conventional NPCs, another $1.82 billion in shariah-compliant NPCs and $49 million at the Pakistan Stock Exchange (PSX).

The analyst recalled that the government had recently increased the RoR on both foreign currency-denominated as well as rupee-denominated saving certificates.

It offered a new RoR in the range of 4% to 8% depending upon the period of investment and the foreign currency in which they have invested. It offered the investment in three foreign currencies including the US dollar, pound and euro for a minimum three months to a maximum of five years.

The RoR on rupee-denominated certificates increased from a minimum of 13.50% to a maximum of 15.5% depending upon the period of investment between three months to five years.

The uptick in RDA inflows in February, however, is seen after the rupee depreciated by Rs25 in two days to record a low at Rs285 against the US dollar in the interbank market last Thursday. It is still hovering near the historically low level as it closed at Rs279/$ on Wednesday. “The country is poised to attract foreign investment (in addition to overseas Pakistanis) in rupee-dominated T-bills and Pakistan Investment Bonds (PIBs) after the rupee-dollar exchange rate hit a historical low and the central bank hiked its key policy rate to 20% at present.”

Published in The Express Tribune, March 9^th, 2023.

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