Foreign investors have withdrawn $42.2 million from Pakistan’s treasury bills (T-bills) as of May 2, 2025, reflecting declining interest in local debt due to falling interest rates. According to the State Bank of Pakistan (SBP), this marks another month of net outflows from the T-bill market.
The SBP recently reduced its key interest rate by 100 basis points to 11%, the lowest level in three years. Since June 2024, the central bank has cut rates by a total of 11 percentage points, reducing the appeal of fixed income assets for international investors. Lower returns have made Pakistan’s T-bills less competitive globally.
In April and March, T-bills saw net outflows of $187.9 million and $197.4 million, respectively, showing a continued downward trend. From July 1, 2024, to May 2, 2025, foreign investors bought $1.183 billion worth of T-bills but withdrew $1.433 billion, resulting in a cumulative net outflow of $250 million.
Analysts say the fall in interest rates is the main reason behind the steady withdrawal. Concerns over the weakening Pakistani rupee have also added to investor caution. The recent brief military conflict with India further dented confidence, despite a ceasefire agreement reached on May 10.
However, there is some good news on the economic front. Pakistan recently received a $1.02 billion installment from the International Monetary Fund (IMF), boosting foreign reserves to $11.45 billion. This financial support offers temporary relief and signals ongoing international backing.
The IMF’s next review is expected in the second half of 2025, where key decisions for Pakistan’s 2026 fiscal year budget will be discussed. Until then, the government faces the challenge of stabilizing investor sentiment and attracting long-term capital inflows.