FDI plummets 49.2 percent to $1.606 billion in July-May

KARACHI: Foreign direct investment (FDI) into Pakistan plunged 49.2 percent in the first 11 months of the current fiscal year to $1.606 billion from a year earlier, figures released by the central bank showed on Tuesday.

In May, FDI inflows dropped 26.20 year-on-year to $230.6 million.

The drop in FDI was due to falling trend in Chinese inflows.

FDI from China dropped to $495.7 million in the July-May 2018/19 fiscal year from

$1.828 billion a year earlier, the State Bank of Pakistan’s data revealed.

However, China continued to dominate FDI during the period under review.

The power sector, which was the major contributor to the FDI, witnessed outflows due to the completion of early harvest China-Pakistan Economic Corridor (CPEC) projects. Foreign companies pulled $261.1 million from the sector in 11 months of this fiscal year.

Oil and gas exploration attracted $298.1 million in FDI in July-May FY19, compared with $354 million the corresponding period last year.

FDI in financial businesses also fell to $270.5 million from $391.6 million.

Analysts mainly blame economic and political uncertainty for weak foreign investment. The bigger budget deficit and the current account deficit undermined economic stability since the start of this fiscal year, they said.

The austerity and monetary adjustments stifled economic growth, making foreign investors wary of pouring in money.

However, FDI might start to recover as soon as the next fiscal year, if the economy improves

and as the International Monetary Fund’s (IMF) supported Extended Fund Facility gets

implemented.

The staff level agreement with the IMF would bring stability to the international community, and help the country fetch more dollar inflows in the form of low mark-up loans and investments both.

SBP Governor Dr Reza Baqir confirms that the central bank has completed all tasks of the IMF and the next board meeting of the IMF was scheduled on July 3. The government’s move ahead with the privatisation programme was also likely to increase the FDI inflows, analyst said.

Pakistan’s Economic Survey for 2018/19 stated that Pakistan has improved its position on ease of doing business index and jumped to 136th position as compared to 147th position last year out of total 190 economies.

The economic survey also cited the World Bank’s doing business report, which stated that the improvements made would surely attract foreign investors and boost FDI, as Pakistan carried out three reforms during the past year in the areas of starting a business, registering property and resolving insolvency.

“The focus of the current government is to improve the investment climate to attract foreign investment in the country. For the purpose, the government has taken different initiatives at the international level,” it said.

Pakistan has recently signed offshore gas pipeline deal with Russia. Similarly, Saudi Arabia has shown interest to invest in a new oil refinery in Pakistan's growing deep-sea port of Gwadar, which was likely to increase FDI in Pakistan.

Moreover, Prime Minister Imran Khan’s recent visits to Malaysia and UAE would also be helpful in attracting more FDI, it added.