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Sunday May 19, 2024

FDI surges 56.3 percent in July-September

By Erum Zaidi
October 19, 2017

KARACHI: The foreign direct investment (FDI) into Pakistan rose 56.3 percent to $661.9 million in the first quarter of the current fiscal year, as power and construction sectors received increased volume of FDI from China under the China-Pakistan Economic Corridor.

The central bank’s data showed on Wednesday that the FDI increased 6.77 percent in September this year, from $204.8 million a year earlier. The data highlighted that China remained a big source of FDI for the country, as the Chinese investors largely focused on electricity generation and infrastructure projects as part of CPEC.   

The net inflow of FDI from China stood at $429.8 million in July-September FY18, an increase of more than two times from a year before.    Besides, that the FDI surge was driven by Malaysian investors accounting for $110.9 million in direct investment during the period under review.

The country had drawn only $7.8 million in FDI from Malaysia in the first quarter of the last fiscal year. The State Bank’s figures showed that net inflow of FDI into the power sector surged 121 percent to $268.2 million in July-September FY18.

Similarly, the construction sector attracted $123.8 million in FDI during the first quarter, compared with $31.4 million in the corresponding period of FY17. Among other sectors, financial business and communications received decent investment flows.

FDI inflows into the banks rose to $71.3 million in July-September FY18 from $60.1 million a year before, while telecoms fetched $68 million worth of direct investment against $8.7 million last year.

Analysts said that first quarter’s figures indicate the current upward trend in the FDI would continue this fiscal year in anticipation of more Chinese inflows under the CPEC. The higher volume of official and private financial inflows is necessary to finance the growing current account deficit.

However, this fact can’t be ruled out that a big part of the envisaged financing for the China-Pakistan Economic Corridor projects is also coming into the country in the shape of direct borrowings from Chinese banks.

That is not a positive sign for the external debt profile of the country.   The SBP’s FY17 annual report that was published last week said, “In most cases, offshore borrowings were used to purchase power generation machinery to be sent to Pakistan, and to pay foreign contractors working on the CPEC projects ie import of goods and services.”

The official loans from China surged more than $2 billion in the last fiscal year. The central bank agreed that Chinese banks and FDIs s are also lending foreign exchange support to the government as well as to Chinese banks operating in Pakistan.

Foreign portfolio investment at Pakistan Stock Exchange saw an outflow of $78.2 million in July-September FY18 as private investors pulled out funds from the local equity market. Total foreign investment fell slightly by 1.4 percent to $534.1 million in the first three months of FY18.