US dollar inflows in Pakistan through Treasury bills (T-bills) hit a 4-year high in March 2024 as the country attracted a net inflow of $82 million in the month.

This makes the a total inflow of $126 million since January 2024, brokerage house Topline Securities said.

“Finally with high local interest rates and stable Pak rupee, smart foreign investors are investing in local T-bills through Special Convertible Rupee Accounts (SCRA)”, it added.

Carry trades are common in countries with high interest rates. But in case of Pakistan, political uncertainty and currency risk was not allowing investors to do this arbitrage, according to the brokerage house.

In FY20, a net T-bills inflow of $612 million came to Pakistan with peak seen in month of Jan-2020 with an inflow of $1.4 billion.

“We think once Pakistan gets the new long term IMF deal, chances are high that more such funds will come to Pakistan to get high yielding government papers thereby providing short term support to Pakistan FX reserves and Rupee,” Topline said.

In March, Pakistani authorities reached a staff-level agreement with the International Monetary Fund (IMF) on the second and final review of the $3 billion Stand-By Arrangement (SBA).

The agreement is subject to approval by the IMF’s Executive Board, upon which the remaining access under the SBA, $1.1 billion will become available for Pakistan.

Also, the incumbent government plans to seek a larger and longer IMF programme by the end of the current fiscal year.

Meanwhile, foreign exchange reserves held by the State Bank of Pakistan (SBP) are standing at $8.022 billion as of March 22.