Funds flow back to Pakistan’s local bonds as economy stabilizes

ISLAMABAD: Pakistan’s domestic debt is set for its first annual inflow in five years, boosted by higher yields and a stable currency, Bloomberg reports.

According to the State Bank of Pakistan‘s latest data on Monday, net foreign inflows in treasury bills reached $875 million in 2024. That’s a turnaround from four consecutive years of gross outflows of $1.4 billion.

Successes in stabilizing Pakistan’s cash-strapped economy have been fruitful, with investors more confident in their ability to service debt, largely thanks to support from the International Monetary Fund. The country’s treasury bills yield about 16 percent to 17 percent, the highest in Asia.

“Investors see a stable currency and high rates that are attracting them to Pakistan,” said Sulaiman Rafique Manya, an independent wealth manager in Karachi. In a sign of the country’s growing appeal, JPMorgan Chase & Co led a group of foreign investors. Visited the country last month. Finance Minister Muhammad Aurangzeb discussed fixed income investment opportunities with the group, assuring them of the government’s support in facilitating their investments.

The country’s foreign exchange reserves have reached their highest level in more than two years after the IMF approved a new loan package of $7 billion last month. Pakistan’s other assets have also performed well. The benchmark stock index has gained 73% over the past 12 months, making it the world’s best performer. Dollar bonds have returned about 40 percent this year, according to data compiled by Bloomberg.