FDI falls 23pc to $1.048 billion in July-March

KARACHI: Foreign direct investment (FDI) plunged 23 percent to $1.048 billion in the first nine months of FY23, the central bank data showed on Wednesday, as the country’s economic and political instability, coupled with a delay in the IMF bailout program, undermined investors’ confidence.

Net foreign direct investment settled at $163 million in March, compared with a net outflow of $30 million a year earlier. The financial sector attracted $248 million in FDI from global investors in July-March FY2023, which was 26 percent lower when compared with $334 million in the corresponding months of last fiscal year, the SBP’s data showed.

A bleak picture of an economy already crushed by escalating political and economic instability is painted by the declining FDI. The coalition government, which took office in April, has been working to find solutions to problems that are increasing in frequency and severity.

The investment in the oil and gas exploration sector dropped 35 percent to $116 million in July-March 2023 from $179 million a year earlier. The investment in the power sector fell 10 percent to $460 million from $512 million.

According to the data, China brought in $319 million in FDI from July through March of FY2023, making it the country that poured in the most FDI overall. However, this was less than the $382 million that China brought in during the same period of the last fiscal year.

Japan ($157 million) and Switzerland ($123 million) were the other two countries that contributed considerable inflows. The IMF program's delay, continuous economic and political turmoil, and Pakistan's growing balance of payments crisis have all eroded international investors' confidence in the country's economy.

Govt raises Rs599 billion via T-bills auction Meanwhile, the government raised Rs599 billion through an auction of Market Treasury Bills on Wednesday, while the yield on short-duration papers remained flat.

The amount that was raised was lower than the pre-auction target of Rs1 trillion. The cut-off yield on a three-month T-bill stood at 21.9999 percent, unchanged from the previous auction. The yield on a six-month paper stayed flat at 21.9789 percent. However, the yield on 12-month paper rose by 10 basis points to 21.9901 percent.

According to analysts, the latest T-bills and PIBs auctions show that the market believes interest rates have peaked. Earlier in the current month, the State Bank of Pakistan raised the policy rate to a record 21 percent to curb crippling inflation.

The SBP is confident that the rate increase, coupled with earlier tightening, will enable it to meet its medium-term inflation target over the next two years. However, analysts claim that the central bank's evaluation is at risk due to the ambiguous nature of domestic as well as global politics. The cycle of monetary tightening has come to an end, according to analysts.