Pakistan is witnessing demand for its sovereign bonds that is the best in 5 years, driven by rising yields and stable currency in light of the improving macroeconomic environment, according to what Bloomberg reported.
According to data from the Central Bank of Pakistan, released yesterday, Monday, net inflows into treasury bills reached $875 million in 2024, which represents a noticeable shift after 4 consecutive years of outflows, which totaled $1.4 billion.
Bloomberg says that investor confidence has strengthened in Pakistan’s ability to repay its debts, thanks to the support of the International Monetary Fund.
Islamabad obtained this loan in exchange for adopting reforms that were characterized by widespread popular opposition, including expanding its chronically low tax base.
The government seeks to increase tax revenues by 1.5% of GDP in fiscal year 2025, and 3% of GDP during the rescue program.
The government also aims to reduce its fiscal deficit by 1.5% to stabilize at 5.9% next year, in response to another major request from the International Monetary Fund.
The country’s treasury bills offer returns ranging between 16% and 17%, which are among the highest in Asia, according to the agency.
“Investors see currency stability and high interest rates, which is what attracts them to Pakistan,” Sulaiman Rafiq Mania, an independent wealth manager in Karachi, said in an interview with Bloomberg.
Growing attraction
The report indicated that Pakistan’s increasing attractiveness led to a visit by a delegation from JP Morgan, which led a group of foreign investors to the country last month, where Finance Minister Muhammad Aurangzeb met with the group and discussed investment opportunities in treasury bills, stressing the government’s support for these projects. Investments.
In conjunction with this improvement, Pakistan’s foreign exchange reserves rose to their highest level in more than two years, after the International Monetary Fund approved a new $7 billion loan package last month.
The country’s main stock index also showed exceptional performance, rising 73% over the past 12 months, making it the best performer in the world, and dollar bonds achieved returns of nearly 40% this year, according to data compiled by Bloomberg.
These positive developments come in light of the slowdown in the inflation rate and the rise in dollar reserves, which enhances the stability of the Pakistani economy and makes local treasury bills an attractive opportunity for foreign investors.
