News on the economic front continues to be concerning as the country’s capital market outflows have touched a two-year high in the ongoing month of March with investors pulling out $397 million. From July 1 till March 28, the equity market saw inflows of $363.463 million and outflows of $771.049 million. Similarly, inflows in treasury bills were $191.874 million with outflows more than double at $432.576 million. This has of course come about due to several factors such as political uncertainty, rupee volatility, and troubles with the International Monetary Fund (IMF) review.
Since the start of the fiscal year, the market has been experiencing volatility, which has been further exacerbated by the ongoing political uncertainty created by the vote of no confidence against Prime Minister Imran Khan. Additionally, the country’s foreign currency reserves hit their lowest level—below $15 billion—of the current fiscal year.
These woes are of course compounded by reports of the Pakistani rupee maintaining its record-breaking downward streak, as it depreciated beyond Rs182 against the US dollar for the first time in history. During the past 10 days, the currency has cumulatively lost 2 percent from Rs178.51 on March 11 due to challenges in the domestic economy coupled with the appreciation of the US dollar and increase in oil prices. Experts are of the view that the delay in the IMF tranche is also further adding to the volatility of the rupee.
The flight of capital of course further adds pressure on the currency and in order to break this cycle, the government will have to look for ways to attract investment into the country. The biggest source of foreign investment in the country is CPEC; but since most of the projects under the first phase have been completed, more investment shall pour in once the second phase commences. However, we cannot solely rely on this and wait around; the government must look to offer incentives and work on facilitating ease of business so that investment can be attracted from other sources as well.
Since the start of the fiscal year, the market has been experiencing volatility, which has been further exacerbated by the ongoing political uncertainty created by the vote of no confidence against Prime Minister Imran Khan. Additionally, the country’s foreign currency reserves hit their lowest level—below $15 billion—of the current fiscal year.
These woes are of course compounded by reports of the Pakistani rupee maintaining its record-breaking downward streak, as it depreciated beyond Rs182 against the US dollar for the first time in history. During the past 10 days, the currency has cumulatively lost 2 percent from Rs178.51 on March 11 due to challenges in the domestic economy coupled with the appreciation of the US dollar and increase in oil prices. Experts are of the view that the delay in the IMF tranche is also further adding to the volatility of the rupee.
The flight of capital of course further adds pressure on the currency and in order to break this cycle, the government will have to look for ways to attract investment into the country. The biggest source of foreign investment in the country is CPEC; but since most of the projects under the first phase have been completed, more investment shall pour in once the second phase commences. However, we cannot solely rely on this and wait around; the government must look to offer incentives and work on facilitating ease of business so that investment can be attracted from other sources as well.