Pakistan drew the biggest monthly net foreign inflows into its sovereign bonds since June 2024, signalling improving investor sentiment for the market as its currency strengthens.
Net inflows in January reached $176 million, compared with withdrawals of $50 million a year ago, according to central bank data compiled by Bloomberg. Short-term bonds with a duration of one year or less drew 85% of these flows.
What’s driving inflows into Pakistan’s bonds?
The shift comes as Pakistan’s rupee recovers from its July low and is on pace to rise against the dollar for an eighth month. The outlook for the economy is improving and foreign exchange reserves have increased to cover more than three months of imports, following a $7 billion loan from the International Monetary Fund in September 2024.
A stable currency likely contributed to the inflows, said Mohammed Sohail, chief executive officer at Topline Securities Ltd. BMI, a unit of Fitch Solutions, expects that policymakers will keep the rupee stable at around 280 against a dollar this year. The currency was trading at 279.8 per dollar on Friday.
Khurram Schehzad, an adviser to the finance minister of Pakistan, cited currency stability, improving external balances and policy continuity among factors driving the flows.