Foreign investment in Pakistan has seen an unprecedented rush following the IMF bailout package. High-interest rates and promises of economic reform have attracted fund managers to invest in the country. Benchmark interest rates have stood at 13.25% since the last rise back in July.
According to a senior official at the State Bank of Pakistan, this is one of the reasons that has contributed to around $1bn inflows, and more inflows are likely in upcoming months.
It is expected that inflows will reach a record $3bn by the end of this fiscal year to June 2020 as per the analysts at Karachi-based broker Topline Securities.
Saad Bin Ahmed, equity head at brokerage Arif Habib said that the State Bank has been “pitching the Pakistani bond market directly” to foreign investors.
Adding, “There are concerns that this is hot money, and at a single click, this money will go out, possibly when the central bank cuts the policy rate. But my expectation, considering the state of the economy, is that they may not even cut the rates until July 2020.”
To further boost this notion the government reduced withholding taxes for foreign investors. Back in July, IMF approved a $6bn bailout package to help Pakistan overcome its balance-of-payments deficit.