RDA inflows surpass $6b in April

Investment had dropped to $110m in Jan, but rose to $125m in Feb, $155m in March

KARACHI:

Overseas Pakistanis investing through Roshan Digital Accounts (RDA) have surpassed the $6 billion mark in April, according to a local brokerage report.

The data revealed that the gross inflows have improved in recent days, totalling at $194 million in the past 38 days, after the government revised up rate of return on Naya Pakistan Certificates. However, the net inflows are estimated significantly low compared to the gross one as investors are allowed to invest and withdraw investment at any point of time.

Investments had dropped to around a two-year low at $110 million in January, but improved to $125 million in February and have now reached $155 million in March 2023.

The RDA was introduced by the Pakistan Tehreek-i-Insaaf (PTI) government in September 2020 to help boost the country’s foreign exchange reserves. A large chunk of the RDA investment goes into Naya Pakistan Certificates, which were designed for overseas and resident Pakistanis having declared assets abroad. Out of the total $6 billion, the expatriates have invested a gross $3.65 billion in Naya Pakistan Certificates in the past 32 months.

However, the central government debt profile suggests net investment in Naya Pakistan Certificates stood at a meagre Rs46 billion ($160 million) in February 2023, which was significantly low compared to gross investment at $3.65 billion in 32 months.

The investment in the certificates stood at Rs50 billion ($174 million) in the prior month of January 2023 – showing a month-on-month drop of 7%, according to the data.

The net investment at $160 million in the certificates suggests that a large number of non-resident Pakistanis have withdrawn the investment or did not re-invest at maturity of the investment period.

Analysts said a large number of overseas Pakistanis have gone on sidelines, adopting a wait-and-see strategy since high political temperature has melted down the domestic economy. A large number of factories are lying closed completely or partially, and millions of people have lost jobs. The fast depletion in foreign currency reserves to critically low levels at $4.24 billion has increased the risk of default on foreign debt repayment.

Pakistan is set to repay a total of $4.5 billion in three months (April to June 2023), while foreign inflows have slowed down to next to nil in wait for the International Monetary Fund (IMF) to resume its $6.5 billion loan programme.

Despite the challenges, the number of deposit holders in RDA has reached 536,000, with investors injecting $39 million in the first seven days of April and another $155 million in the prior month of March. They have also invested another gross $490 million in stocks of companies listed at the Pakistan Stock Exchange.

In conclusion, despite the current economic challenges, the RDA has proved to be an essential tool in attracting foreign investment from overseas Pakistanis. While there are concerns over net inflows, the gross inflows have surpassed the $6 billion mark, and investors have shown interest in the stock market. The government needs to work on restoring investor confidence and ensuring economic stability to encourage more foreign investment in the country.

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

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