Decline in Roshan Digital Account (RDA) Inflows Amid Economic Challenges

According to the latest data from the State Bank of Pakistan (SBP), the Roshan Digital Account (RDA) inflows experienced an 11% drop in June, falling to $200 million from $224 million in May. $14 million of the June inflows were repatriated, while $142 million was utilized locally.

Since its launch in September 2020, the RDA has brought in a total of $8.255 billion by the end of June 2024. The initiative was launched to attract dollar inflows and ease the economic impact of the rapid outflow of hot money caused by the COVID-19 pandemic in 2020, which saw around $4 billion exit domestic bonds. A substantial portion of these inflows, amounting to $5.212 billion, has been used locally, providing significant relief to the government as it wrestles with dollar shortages.

Key Figures and Economic Impact

• Total Inflows: $8.255 billion since September 2020
• Local Utilization: $5.212 billion
• Repatriated Funds: $1.6 billion
• Outstanding Liabilities: $1.4 billion as of June 2024
• Naya Pakistan Certificates (NPCs): $940 million in total, with $348 million in conventional NPCs and $592 million in Islamic instruments

Significant Drop in Roshan Digital Account Inflows Highlights Pakistan’s Fiscal Struggles

To save foreign exchange, the government greatly reduced imports during the fiscal year 2022-23. It led to a contraction in growth. However, import restrictions have continued into FY24. Despite recent advancements in Pakistan’s rating by Fitch and S&P, the country is still incapable of raising dollars through international bond markets. Due to that, the government is considering inviting marketing agencies for the Panda Bonds launch, having received bids from three Chinese and two Pakistani companies. However, financial experts caution that these companies will be paid agents and not accountable for the bonds’ success. They highlight that fixing Chinese debt re-profiling issues is important for a positive market response.

Experts also claim that the decline in RDA inflows in June highlights growing debt servicing challenges, which may discourage investors. The RDA initiative provided substantial relief to Pakistan’s economy by attracting dollar inflows. However, the recent decline in inflows and ongoing debt challenges underscore the need for strategic measures to ensure investor confidence and economic stability.

Check Out: Roshan Digital Account Inflow Drops to $142 Million in January – PhoneWorld