FDI jumps 57.2pc to $1.146bln in July-Nov

KARACHI: Foreign direct investment (FDI) in Pakistan surged 57.2 percent year on year to $1.146 billion in the five months of the current fiscal year with China being the key source of foreign inflows, the central bank’s data showed on Friday.

The State Bank of Pakistan’s (SBP) figures revealed that investment inflows from China increased to $837.4 million in July-November FY2018 from a meager $217.3 million in the corresponding period a year ago.

In November, foreign direct investment stood at $206.7 million, 8.3 percent higher than the inflows recorded during the same month last year.

Most of the Chinese investments came in Pakistan under the China-Pakistan Economic Corridor (CPEC) projects. China pledged more than $50 billion of investment in infrastructure developments, including mainly energy sector, in the country under CPEC connecting northern Xinjiang in China with southern Karachi.

SBP’s data further showed that foreign investors were flocking to the power sector.

FDI in the energy sector hit $538.9 million during the five-month period, up 151 percent from a year earlier and accounting for almost half of total foreign direct investment. Chinese firms have continued to pour funds into the country’s energy projects to reduce demand and supply gap of electricity.

Construction sector was the second after energy projects that attracted a significant amount of FDI. Inflow of direct investment in the construction sector rose sharply to $271.3 million in July-November FY2018 compared with $38.9 million in the same period of FY2017.

Analysts said Pakistan’s favourable growth momentum as projected by the International Monetary Fund (IMF) and other international financial institutions, could boost global investor confidence on the country’s economy.

IMF forecast growth at 5.6 percent for FY2018 – a rate which is nearly equal to what the Asian Development Bank has predicted in its regional development outlook. Pakistan achieved 5.3 percent growth in FY2017, the highest in the past one decade.

“Improved security conditions, energy supply, and infrastructure investment are likely to further brighten the prospects of FDI during the current fiscal year,” an analyst said. “However, the external account challenges along with political uncertainty could affect the investor sentiment.” The country drew $2.410 billion in FDI during the last fiscal year of 2016/17, up 4.6 percent from a year earlier.

Analysts also said that whether or not the increased FDI from China would keep up its momentum this year remains to be seen. China expressed concerns over delay in completions of power projects under CPEC and intercompany debts that are imperiling the whole energy chain involved power producers and distributors.

Net inflow of FDI from Malaysia amounted to $112.6 million in July-November FY2018 as against $11.2 million in the same period of FY2017.

Foreign private investment remained in negative during July-November FY2018. Foreign investors pulled out $96.1 million inflows of the local equity market during the period under review.

Analysts were expecting a growth in foreign portfolio investment after an upgrade to emerging market index of Morgan Stanley Capital International from frontier markets. Equity fund managers are betting on rupee depreciation to take fresh positions in the market, the analysts said. Total foreign investment fell 43.6 percent to $1 billion in July-November FY2018, the SBP’s data showed.