The foreign investment in Pakistan has reached a record of $2.225 billion in treasury bills during the fiscal year 2019-20. The State Bank of Pakistan confirmed that the latest T-bills auction that was held on 15th January yielded $537.9 million that is the highest amount for a single auction.
Even though the speedy foreign investment has helped the government in improving the reserves, it has started a debate among economists and analysts as a few of them believe that the ‘hot money’ can leave the country in one go that can be disastrous for the economy. But others are supportive of this idea of increasing the foreign reserves by accepting foreign investment.
During the Jan 15th auction the government received Rs1.1 trillion however it raised Rs274bn in T-bills. State Bank of Pakistan issued data that showed that 95% of investment in T-Bills came from the UK and the U.S. $537.9m investment out of the total investment came from the UK while $80.2m came from the U.S.
In the current fiscal year, the investment from the UK and the US stood at $1.392bn and $758.3m respectively. The inflows via T-bills helped the government in developing its reserves that pushed the reserves of State Bank to $11.568bn and the total reserves of Pakistan to $18.123bn.
The director research at Arif Habib Limited Samiullah Tariq said, “It is much better to borrow through T-bills rather than issue Eurobonds to raise foreign exchange. We saw that the government paid $1bn to retire the Eurobonds debt in December 2019 without issuing another Eurobonds.”
As per Mr. Tariq, the only risk that associated with T-bills investment or hot money is that it can leave the country in one go without any restriction.
He said, “But it is only possible if something happens extraordinary against the country or the economy.”