FDI slips 46.4pc year-on-year in July-October

KARACHI: Foreign direct investment into Pakistan fell $46.4 percent to $600.7 million in the first four months of the current fiscal year from the same period a year earlier, the central bank data showed on Wednesday.

In October, Pakistan’s cross-border investments dipped to $161.2 million, compared with $354.6 million in the corresponding month last year, the State Bank of Pakistan (SBP) data showed.

Net FDI inflows to Pakistan have declined sharply this fiscal year in the face of slowdown in Chinese investments for CPEC-related projects, as Chinese inflows for the four months of the year dropped 52 percent to $334.9 million.

The contraction in the FDI is driven by weak Chinese investment in the power sector. This sector saw lower inflows worth $104.8 million in July-October FY19, compared with $400 million in the same period last year. The fall in the FDI in the electricity sector by the Chinese firms is due to completion of some energy projects under CPEC scheme.

Inflows from the US, UK, UAE, and other countries remained insignificant during the period under review.

Analysts said foreign investor sentiment remains bearish due to deteriorating foreign currency reserves and lack of clarity over how the tough requirements for the new International Monetary Fund (IMF) programme would be met to achieve economic stabilisation.

“A continual depreciation of exchange rate has forced foreign investors on wait-and-see mode,” said Dr Ashfaque H Khan, dean at NUST School of Social Sciences.

“Most foreign investors are sceptical because the government has no clue how it will satisfy the IMF condition of keeping budget and current account deficit lower,” Khan said. He expects the FDI to stand at $2.5-3 billion in FY19.

Pakistan attracted $3.092 billion during last fiscal year. The government is scheduled to start holding policy level discussions with the IMF staff mission for the new bailout package next week.

These discussions would finalise terms and conditions of the potential programme, such as size, tenure, and disbursement mechanism.

Key businesses, such as telecommunications, banks and food witnessed decreasing trend in FDI during July-October FY19, the central bank data revealed.

The amount being directly invested in the financial businesses fell to $61.9 million from $217.2 million.

Telecommunications sector saw an outflow of $71.9 million against the inflows of $62.3 million last year.

Total foreign investment fell 67.3 percent to $331.3 million in the July to October period, compared with $1.013 billion in the corresponding period last year, the SBP said on its website.

There was an outflow of $269.5 million from July to October this year, compared with $57.2 million in the same period the previous year.