Karachi: Foreign direct investment (FDI) fell 33 per cent year-on-year (YoY) and declined by 17.3 per cent compared to the preceding month of January, data released by the State Bank of Pakistan showed on Thursday.
According to SBP data, FDI inflows during July-February 2021-22 (8MFY22) registered a positive growth of 6pc over the corresponding period of the previous financial year. The second half of the current financial year is facing several negative impacts including war in Ukraine and rising oil prices in international markets.
A record rise in oil prices as well as rates of other commodities has widened the trade deficit. The FDI growth rate of 6 per cent is much lower than the current account deficit of $11.6 billion in the country.
Poor investment climate impacted FDI inflows, which saw a sharp drop of 50 per cent to $110 million in January this year from $218.7 million in December 2021.
The real change was seen in January as the first half (1HFY22) of the current fiscal saw a 20 per cent growth in FDI. Inflows stood at $218.7 million in December 2021 – showing a jump of 29 per cent – compared to $169.4 million in December 2020.
The declining trend of the last two months may end the positive trend of growth of 20pc during 1HFY22.
Although exports have increased by 25 per cent, this amount is still not enough to offset the impact of the huge import bill. The only positive was the influx of news dispatches that kept the growth momentum going during 8MFY22.
SBP data shows FDI inflows stood at $90.8 million in February this year as compared to $137 million in the same month in FY15; 33.6 percent drop
During 8MFY22, the country received a total of $1.257bn as compared to 1.185bn in the same period of FY15, an increase of 6.1pc.
Portfolio investments during July-February FY22 showed that outflows were $314m higher as compared to outflows of $253m in 8MFY21.
Country-by-country inflows also reflected the changing situation on the external fronts of the economy. FDI inflows from China fell to $384.5m during July-February FY22, as against $522.7m in 8MFY21.
China has been the largest investor in the country. It still retained its first position in the list of countries investing in Pakistan.
Despite good relations with China, Pakistan is unable to attract Chinese investors for any significant changes in the economy. China is the country’s largest trading partner but the rest is largely in China’s favor.
Inflows from Hong Kong increased from $25 million a year ago to $130 million in 8MFY22.
The biggest change was seen in inflows from the United States, which more than doubled to $175 million in 8MFY22, compared to $84.2 million in the same period of FY2011.
Other important investors include the United Arab Emirates with $78m, Switzerland with $80.4m and Singapore with $79m.
Published in Dawn, March 18, 2022