FDI falls 35.2pc to $880.7mln in July-November

KARACHI: Pakistan’s foreign direct investment (FDI) fell 35.2 percent to $880.7 million in the first five months of the current fiscal year, central bank data showed on Monday, mostly on the back of economic uncertainty.

Foreign direct investment (FDI), however, rose to $280 million in November from $239.5 million a year earlier, the State Bank of Pakistan (SBP) data showed.

Net FDI inflows to Pakistan slipped also because of a significant drop in investment received from China under the China-Pakistan Economic Corridor framework. Chinese firms invested $584 million in the country during July-November 2018/19 fiscal year, compared with $911.8 million in the same period last year, the SBP data revealed. Inflows from the United Kingdom fell to $79 million from $93.3 million.

However, cross-border investment from United States saw a marginal increase in the period under review. US companies poured $56 million into various businesses in the five months of this fiscal year. That compared with $55.7 in the corresponding period of last year.

Businesses such as power, oil and gas exploration, construction and banking saw a declining trajectory.

The power generation sector fetched $167 million FDI, compared with $512.7 million last year.

The amount being directly invested in the construction sector decreased to $242.5 million from $272.3 million. The energy and financial businesses reported FDI inflows of $72.5 million and $76.3 million in contrast to $80.7 million $238.4 million last year.

Analysts said investors were not optimistic about the prospects for the country’s economy. They expected the business environment to be worse, as a result of economic uncertainty over the policies of the Pakistan Tehreek-e-Insaf (PTI) government.

“Foreign investor wait-and-see policy has led fall in the FDI so far in five months. Most foreign companies are likely to keep new investment plans on hold,” said an investor.

Rating agency Fitch downgraded Pakistan’s long-term foreign currency issuer default rating to ‘B- from ‘B’ on heighted external financing risk, increased foreign debt payments and weakening fiscal position. The government is seeking to attract direct investment in export-oriented sectors by formulating an investment framework. Pakistan’s balance of payments might breathe a sigh of relief on expected $2 billion inflows from China this month.

And in the month of January 2019, the country is most likely to attain $6 billion facility as is managed from Saudi Arabia. An amount of $1 billion of $3 billion Saudi oil facility was also deposited to the SBP last week.

Pakistan has formally submitted to the Inter-national Monetary Fund (IMF) its Memorandum of Economic and Financial Policies (MEFP) envisaging macroeconomic stabilisation graduating into growth strategy over the next three years.

The SBP’s data showed that the local equity market witnessed an outflow of 330.6 million in July-November FY19 against $100.1 million last year. Total foreign investment stood at $550.1 million, down 54.5 percent in July-November FY19.