FDI declines 2.9 percent to $1.487bln in July-January

KARACHI: Foreign direct investment (FDI) fell 2.9 percent during the seven months of the current fiscal year of 2017/18, figures from the State Bank of Pakistan showed on Thursday, as foreign firms remained cautious of pouring money into domestic businesses amid political instability.

Net inflows were $1.487 billion during July-January FY18, compared with $1.532 billion a year ago.

FDI has remained dry since the first half of this fiscal year as investments from the European Union, Gulf and Asian firms continued to decline. However, FDI flows from China compensated for the considerable hold up in the major sources of cross-border investment.

A sector-wise break up on the FDI data showed that investments in most of the businesses remained low, except power, construction and financial sectors.

The country attracted $1 billon in FDI from China in July-January FY18, compared with $474.6 million during the corresponding period of last year. Chinese firms are making huge investments in the power and construction sectors under the China-Pakistan Economic Corridor (CPEC) framework.

FDI in the power sector rose to $541 million from $370.2 million a year earlier. Direct investment from Malaysian firms stood at $118.2 million, compared with $14.9 million last year.

Investments from the United States sharply increased to $73.5 million during seven months of FY18 against $1.6 million in the same month of the last fiscal year.

Analysts said FDI flows are posting a mild decrease. However, it is likely to remain at relatively steady level this fiscal year.

FDI rose to $2.218 billion in FY17 from $1.985 billion in the previous year. “The FDI figure is unlikely to see any drop this year, but its outlook will depend on how the government set tackled the host of challenges related to political uncertainty and growing budget and current account deficits,” said an analyst.

“The US intention to put Pakistan on a global terrorist-financing watch list with an anti-money laundering monitoring group (Financial Action TASK Force) could also hamper foreign investment flows in times to come,” analysts said.