Foreigners have continued to step up investment in Pakistan’s debt instruments, mostly in short-term treasury bills (T-bills), and have partly helped strengthen the country’s foreign exchange reserves to over $8 billion at the beginning of November.The return of stability to the rupee-dollar parity coupled with high rates of return on debt instruments encouraged foreigners to resume investment in Pakistan.They invested a net $678 million in the debt instruments in the past around five months - July-November 2019, the State Bank of Pakistan (SBP) reported earlier this week.“The investment has partly helped strengthen the country’s foreign currency reserves (held by the SBP),” Arif Habib Limited Head of Research Samiullah Tariq said while talking to The Express Tribune.Foreign currency reserves, held by the central bank, surged $443 million to $8.35 billion in the week ended on November 1, 2019, the central bank reported last week.In the current month of November, the foreigners have so far invested a net $235 million. The investment is expected to give a further boost to the reserves later in the month and subsequently in the current fiscal year.“Foreigners are expected to invest a net $2 billion in T-bills in the current fiscal year,” Tariq anticipated.Breakdown of the investment suggested that foreigners had invested $675 million in three, six and 12-month T-bills, which offered a rate of return of up to 13.28%. They have invested another $3 million in three-year Pakistan Investment Bonds (PIBs), which give a return of 11.8%.The central bank has also purchased dollars from currency dealers in a bid to shore up the foreign currency reserves, it has been learnt.Foreigners resumed investment in Pakistan’s debt instruments in July 2019 after a gap of 25 months. They invested nothing during the 25-month period from June 2017 to June 2019 as high volatility and uncertainty in the rupee-dollar parity discouraged them from making an investment.The central bank let the rupee depreciate 52% from December 2017 to Rs160.05 against the US dollar on June 30, 2019.The rupee has largely remained stable since then. Rather, it recovered 2.88% or Rs4.65 to Rs155.40 on Wednesday compared to Rs160.05 on June 30 and the stability has pushed the investors to pour investment into Pakistan.The benchmark interest rate, standing at an eight-year high of 13.25% at present, encouraged foreigners to renew their investment in the debt instruments in Pakistan because the interest rate was lower in their home countries, Tariq said.Most of the investment in the debt instruments came from two leading developed countries - the US and the UK. Most of the fund managers dealing with global investors are based in these two countries.Moreover, Islamabad formally entered into a 39-month International Monetary Fund (IMF) loan programme in July, when the lender released the first tranche of $991.4 million out of the total facility of $6 billion.“The IMF programme is another reason why foreign investors have staged a comeback,” Tariq said. “Foreigners feel comfortable investing in countries operating under the IMF programme.”Going forward, the SBP may keep the interest rate high to encourage investors to prolong their investment in Pakistan.Published in The Express Tribune, November 14, 2019.Like Business on Facebook , follow @TribuneBiz on Twitter to stay informed and join in the conversation.