SBP chief assures market for timely foreign debt repayments – Business

KARACHI: State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Thursday that the country will honor all external debt obligations on time.

“There should be no worries about it,” he said at a gong-ringing ceremony at the Pakistan Stock Exchange (PSX).

Sovereign default risk reached its highest level since November 2009 at the start of the week. The country’s five-year credit default swap (CDS) – a type of sovereign default risk insurance – rose more than three percentage points on Oct. 25 to 52.8%, a 13-year high. year.

The rise in CDS levels reflects investors’ loss of confidence in Pakistan’s ability to repay its international borrowings.

“Recent progress on international financial institutions is a positive development,” the SBP governor said, referring to the seventh and eighth reviews of the International Monetary Fund’s program as well as the $1.5 billion inflow from the Asian Development Bank.

He said additional inflows from other multilateral and bilateral lenders, including the Asian Infrastructure Investment Bank, are also expected soon. “These inflows will not only help us service our debts, but also improve our foreign exchange reserves,” he said.

Earlier, Mr. Ahmad officially launched the Roshan Equity Investment (REI), a product offered to Non-Resident Pakistanis (NRPs) under the umbrella of Roshan Digital Accounts (RDAs) introduced by the SBP in 2020. The REI allows NRP to invest in the stock market digitally.

Mr. Ahmad said RDAs have provided NRPs with the ability to connect to the national banking system. He said NRPs from 175 countries opened more than 484,000 RDAs and generated total inflows of around $5.28 billion. Investment in conventional Naya Pakistan certificates was $1.7 billion, while that in Islamic certificates was $1.6 billion.

“However, investment through RDAs in the exchange has been relatively subdued. They were only $35 million,” he said, adding that the official launch of REI is expected to boost investment in the stock market through a fully digitized process.

In his pre-recorded message, Chairman of the Securities and Exchange Commission of Pakistan, Aamir Khan, told the audience that the enabling environment created by opening digital accounts in the stock market and mutual funds, the electronic IPO process and tie-ups with RDAs led to 11% and 6% growth in the investor base in fiscal 2021 and 2022, respectively.

Talk to Dawn On the sidelines of the launch, Nadir Rahman, COO of PSX, said the exchange was working closely with the SBP to promote public debt trading on the exchange. “The channel is already available, but it’s limited at the banking level,” he said.

Treasury bills have been traded on the PSX since 2014. But the avenue of investment has not gained popularity due to the cumbersome process. The retail investor must go to a bank and open an Investor Portfolio Securities (IPS) account, which is a depository account maintained to purchase and hold government debt.

The PSX will soon allow investors to open IPS accounts under the NCCPL umbrella,” he said, referring to the National Clearing Company of Pakistan, the entity responsible for settling trades.

“Treasury bills will trade like common stock,” Rahman said.

Posted in Dawn, October 28, 2022

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John A. Bogar