Outflows of 'hot' money surge to $1.8 billion

Foreign investors divested some $1.8 billion investment from the government debt instruments during this fiscal year (FY20). Economists said that the global markets are witnessing disintegration due to COVID-19 panic and foreign investors are offloading their portfolios irrespective of asset class of geography.
Accordingly, the outflow of hot money from Pakistan has also picked up pace. Mainly the UK-based foreign investors are aggressively withdrawing their investment in government securities to secure their money in the recent economic slowdown due to coronavirus pandemic.
According to latest data released by State Bank of Pakistan (SBP) on Wednesday, cumulatively foreign investors divested some $1.873 billion from their investments in the government securities - Market Treasury Bills (T-Bills) and Pakistan Investment Bonds (PIBS) - during 1st July 2019 to March 23, 2020 period.
The Special Convertible Rupee Account (SCRA) data shows that some $1.833 billion were divested from T-Bills and $ 40 million from PIBs during this fiscal year. The major selling of $1.639 million was made by UK-based investors from T-bills. While the remaining investments in the government securities were withdrawn by the US, Bahrain and Ireland based investors.
With $3.492 billion inflows and $ 1.873 billion outflows, net foreign investment in the government's debt instruments, including T-Bills and PIBs stand at $ 1.619 billion during FY20. Most of the investment amounting to $3.43 billion was arrived in short-term government papers, while the remaining $61 million was attracted by PIBs.
On March 23, there were no fresh inflows in any government security and entire transactions were made for divestment. According to the SBP, foreign investors divested some $95million (net) from the investment in T-Bills on March 23, 2020. Cumulatively, with this repatriation, total divestment during March 2020 has reached $1.5 billion against inflows of $18.4 million.
The massive outflow of hot money has put some pressure on exchange rate, which pushed the dollar rate to Rs 161.60 in the interbank market Wednesday. SBP Governor Dr Reza Baqir, in a recent press conference said that globally foreign investors are taking precautionary measures and divesting investments from government securities to dollar, which seems the most secured investment.