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Thursday, February 15, 2024

FDI declines by 35 per cent in 9 months

According to data, Foreign Direct Investment (FDI) slumped 35.1 percent to $1.395 billion in the nine months of this fiscal year.

According to data released by the State Bank of Pakistan (SBP), the FDI fell by 35.1pc to $1.395 billion during July-March FY21 compared to $2.15bn in the same period of last fiscal year.

The data showed a decline of 40pc, as the inflow in March was just $167.6 million compared to $278.7m in the same month of last  year.

However, as the inflow in March this year slightly improved compared to February when the inflow was $155m, the FDI trend shows that the overall trend is on the decline.

The State Bank of Pakistan’s figures disclosed that FDI inflows from China and Hong Kong and Netherlands declined from a year earlier, and those from the United Kingdom increased in July-March FY2021. Inflows from Netherlands also declined to $65.4 million from $84 million.

The net FDI inflows from China went down to $650.8 million in July-March FY2021 from $859.3 million a year ago and from Hong Kong they declined to $105.7 million from $135.1 million.

in July-March FY2021, oil and gas explorations inflows were $158.3 million which down from $218.3 million a year earlier.

The investment from China to finance the energy projects under the China Pakistan Economic Corridor (CPEC) slowed down, despite the power sector being the largest recipient of FDI.

According to data, FDI in the power sector declined to $737.8 million in July-March FY2021 from $742.4 million a year ago.

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Telecommunications sector managed to pull $62.6 million FDI from the country in the nine months of this fiscal year, compared with an inflow of $464.8 million last year.

Analysts believe that FDI in Pakistan has gone down due to the new waves of coronavirus pandemic which has slowed down the world economy.

However, the current account of eight months of FY21 is surplus with $881m and the SBP reserves have reached a four-year high. Due to the pandemic situation in India and Bangladesh, the export orders have increased and there is lower consumption of foreign exchange in the domestic market which has resulted in raising the value of Pakistani rupee against US dollar as it has appreciated by 9pc since August 2020.

The government is also making efforts to capture foreign investments through Roshan digital accounts and by offering high returns on domestic bonds (Pakistan Investment Bonds and treasury bills). Though both these initiatives have started to attract foreign investment, the amount is still not enough to avoid loans from IMF, World Bank etc.