KARACHI: Several misconceptions about the implications of international investors’ investments in the debt markets of Pakistan are false.
In this regard, the State Bank of Pakistan clarified the facts which are mentioned as under:
International investors have been investing in the equity markets of Pakistan for a long time. Such investments are considered portfolio investments, just like investments in debt instruments, and use the same framework of Special Convertible Rupee Account (SCRA).
These investors have been able to move capital in and out of our financial markets without problems for the Pakistan economy.
Recently, international investors have started investing in debt instruments issued by the government of Pakistan. This is largely a manifestation of their growing confidence in the positive outlook for the economy.
As endorsed by international financial institutions, including the International Monetary Fund (IMF), the Asian Development Bank (ADB) and the World Bank, and rating agencies, Pakistan’s reform program is beginning to show results.
Read more: Pakistan will soften its terms once economy improves: Governor SBP
One key aspect of this reform program has been the shift to a market-based exchange rate system since May 2019.
The interest rates have been higher in the past for example interest rates were around 13.75 percent.
Investment in government securities by international investors provides several benefits to the economy.
The simplification of taxation for investment in government securities that was recently approved by the Economic Coordination Committee (ECC) will promote greater interest in investments in longer-dated maturities.
There are several emerging market economies that have attracted investments from international investors in much greater amounts on a sustainable basis in their local currency debt markets and have used them as a major stimulus in their macroeconomic development.
Also read: Pakistan receives $1.2bn from Asian Development Bank
The SBP continues to monitor developments in the financial sector carefully and stands ready to take action against any risks.
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