‘Govt must improve credit rating’ – 20 May 2023

Net investment in NPCs hits mere $555m in March 2023, compared to total investment of $3.9b

Economists have urged the government to take urgent measures to have the country’s international credit ratings improved to save Pakistan’s fading economy.

Speaking to The Express Tribune, Pak-Kuwait Investment Company (PKIC) Head of Research Samiullah Tariq said, “The government has to take measures to revive the fading economy and get its credit rating improved by global rating agencies like Moody’, Fitch and S&P.”

“The measures will help win back the confidence of overseas Pakistanis’ and invite extended investment in instruments like the Naya Pakistan Certificates (NPCs).”

The comments came as Pakistan’s Roshan Digital Account (RDA) initiative, aimed at attracting foreign currency from overseas Pakistanis, is facing a gradual decline, impacting the country’s foreign exchange reserves.

State Bank of Pakistan (SBP) data reveals that over the past 31 months, non-resident Pakistanis have injected more than $6 billion into the domestic economy through RDA. Notably, 65% ($3.9 billion) of this investment has been made in NPCs since the scheme’s launch in September 2020.

However, recent data from the central bank indicates a significant drop in net investment in NPC, reaching a mere $555 million in March 2023, compared to the total investment of $3.9 billion. This represents a decline from the peak net investment of $1.42 billion recorded in March 2022.

It is important to note that this decline coincides with a change in government, with the PTI losing power in April 2022 and being replaced by a coalition government led by PML-N.

The decline in net investment in NPCs over the past year amounts to $868 million, resulting in a depletion of foreign exchange reserves by the same amount. The RDA initiative was introduced to build foreign exchange reserves and prevent devaluation of the Pakistani rupee against the US dollar. The PTI government designed the NPCs specifically for overseas Pakistanis and residents who declared assets abroad, with the aim of bolstering reserves.

However, the current foreign exchange reserves have dropped to a critically low level of $4.4 billion, which is barely sufficient to finance one month of imports.

Arif Habib Ltd reported that outflows from the certificates have exceeded inflows in the past four quarters. The highest outflow of $808 million was recorded during April to June 2022, against inflows of $338 million in the same period. In later quarters, outflows ranged from $354-433 million, while inflows ranged from $235-275 million.

Industry experts attribute the declining investment in NPCs to various factors. Ismail Iqbal Securities, Head of Research, Fahad Rauf highlighted that the PTI government and former SBP governor Reza Baqir, who were instrumental in launching the RDA initiative, are no longer in power. Additionally, “The PML-N government has failed to market the certificates as aggressively as the previous government did.”

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