UK, UAE & US Withdraw $1 Billion from Pakistan’s Treasury Bills
In a concerning development for the Pakistani economy, the UK, UAE, and US have withdrawn nearly $1 billion from the country’s treasury bills during the current financial year. This significant outflow of foreign investment has raised concerns about the country’s economic stability and its ability to weather the challenges posed by global economic uncertainty.
According to data released by the State Bank of Pakistan, between July 1 and March 14 this fiscal year, inflows into treasury bills (T-bills) totalled $1.163 billion, while outflows stood at $1.121 billion, leaving a net balance of $42 million. This means that foreign investors have withdrawn a substantial amount of money from Pakistan’s treasury bills, which is a major worry for the country’s economic policymakers.
The news comes at a time when the global economy is facing unprecedented uncertainty, with the introduction of tariffs by the US government under the Trump administration having a ripple effect on international trade. The imposition of tariffs on steel and aluminum imports by the US has led to retaliatory measures from other countries, including China, the EU, and Canada, which has resulted in a trade war that is affecting global economic growth.
Pakistan’s economy is particularly vulnerable to global economic shocks due to its dependence on foreign capital and its limited foreign exchange reserves. The country’s economy is heavily reliant on foreign investment, which accounts for a significant portion of its GDP. Therefore, any decline in foreign investment can have serious consequences for the country’s economic stability.
The outflow of foreign investment from Pakistan’s treasury bills is a significant concern because it can lead to a decline in the country’s foreign exchange reserves, which are already under pressure. The country’s foreign exchange reserves stood at $10.3 billion in February, which is barely enough to cover three months of imports. A decline in foreign exchange reserves can lead to a shortage of foreign currency, which can cause inflation, increase the cost of imports, and make it difficult for the country to service its debt.
Furthermore, the outflow of foreign investment can also lead to a decline in the value of the Pakistani rupee, which can have serious consequences for the country’s economy. A decline in the value of the rupee can make imported goods more expensive, increase the cost of living, and reduce the purchasing power of the average Pakistani citizen.
The reasons behind the outflow of foreign investment from Pakistan’s treasury bills are not entirely clear, but analysts point to several factors, including the country’s weak economic fundamentals, political instability, and global economic uncertainty. Pakistan’s economic fundamentals are weak, with the country’s debt-to-GDP ratio standing at over 70%. The country’s political stability is also a concern, with the government facing opposition from the opposition parties and the military.
Furthermore, the global economic uncertainty caused by the trade war between the US and China has also contributed to the outflow of foreign investment from Pakistan’s treasury bills. Investors are hesitant to invest in countries that are facing political and economic uncertainty, and Pakistan is no exception.
In conclusion, the outflow of foreign investment from Pakistan’s treasury bills is a major concern for the country’s economic policymakers. The country needs to take immediate steps to address its economic challenges and restore confidence among foreign investors. This can be done by implementing economic reforms, improving the country’s political stability, and promoting foreign investment.
