FDI slips 59 percent to $73.4 million in July

KARACHI: Pakistan’s foreign direct investment (FDI) inflows dipped 59 percent year-on-year to $73.4 million in the first month of the current fiscal year, figures published from the State Bank of Pakistan (SBP) showed on Wednesday.

The decline in FDI was largely driven by Chinese outflows from the country during the month under review. The Chinese firms pulled $4.5 million from various businesses of Pakistan in July as against the inflows of $90 million in the same month last year, according to the SBP’s data.

FDI inflows to Pakistan are on the decline amid completion of early harvest projects under the China-Pakistan Economic Corridor (CPEC). Investment flows from the United Kingdom fell to $11.1 million, the central bank’s data revealed.

Food, power and financial sectors witnessed outflows in the first month of this fiscal year. The power sector, which was the single largest recipient of the CPEC-related net investment flows over the last few years, saw $14.4 million having pulled out from the country. However, foreign firms invested $11.6 million in the power sector in July last year.

Food and financial sectors also witnessed outflows of $5.3 million and $5.4 million in July FY2020, respectively. However, some other sectors, including textile and pharmaceuticals, remained on the investors’ radar.

Textile sector drew $10.7 million in FDI in July compared with $5.7 million in the same month last year. Pharmaceutical companies received $10.3 million worth of FDI in July FY2020 compared with $2 million in FY2019.

Analysts said an economic slowdown on the back of macro adjustment policies, currency depreciation and increased interest rates weighed on the foreign direct investment. “FDI continued to maintain its downward trajectory, but with only a single month’s figure, it’s still not enough to judge a trend of investment flows into Pakistan in future,” said an analyst.

“The outlook for the FDI remains uncertain due to tough economic environment in the Europe, USA and Middle East. Global economic slump is likely to dent corporate spending plans across the world.”

The implementation of the International Monetary Fund (IMF) program will send a positive signal to the foreign investors, but delay of some projects under the CPEC to hamper the Chinese flows to Pakistan, according to an analyst. The IMF projected Pakistan’s FDI to reach $2.107 billion in FY2020. Pakistan agreed to $6 billion loan program last month.

FDI slid 50 percent to $1.737 billion in July-June 2018/19. Foreign portfolio investment saw an inflow of $33.9 million in July as against an outflow of $42.1 million a year earlier. However, total foreign investment dropped to $107.2 million from $136.8 million.